The U.K. currency snapped a two-day decline as a private report showed a factory-price index rose in March to the highest since at least 1999, prompting investors to reduce bets on an interest rate cut by the Bank of England, which has the highest borrowing costs of the Group of Seven nations. Stocks in Europe gained after UBS AG said it will seek about $15 billion in a right offer.
Against the euro, the pound gained 0.9 percent to 78.91 pence by 1:32 p.m. in London, from 79.61 yesterday. It was little changed at $1.9843, after earlier slipping as much as 0.5 percent to the lowest level since March 20. The U.K. currency may rise to 77.5 pence per euro in three months, Stretch said.
Europe's Dow Jones Stoxx 600 Index added 1.6 percent and the MSCI Asia Pacific Index increased 0.2 percent. The FTSE 100 Index rose 0.9 percent.
A gauge of producer prices based on a survey of more than 600 manufacturers climbed to 60.6, the most since records began, from 59.9 in February, the Chartered Institute of Purchasing and Supply said today. An index of factory growth stayed at 51.3, higher than the median estimate of 51 in a Bloomberg News survey of 29 economists.
In carry trades, investors borrow at the low rates available in Japan and Switzerland and convert the proceeds into a currency, such as the pound, they can lend out for a higher return. They earn the spread between the borrowing and lending rates, taking the risk currency moves will erase their profit.