Pound Falls as Telegraph Says Lloyds’ Funding Plan Fails Test

The pound fell to a one-week low against the dollar after the Daily Telegraph said Lloyds Banking Group Plc failed to raise enough capital to meet Financial Service Authority requirements.

The dollar strengthened against 15 of its 16 major counterparts as the Telegraph, without citing anyone, said Lloyds has been forced to abandon a move to withdraw from the U.K. government’s asset protection plan. New Zealand’s dollar headed for a 10th-consecutive week of advances, matching the record winning streak ending in May 1999, as borrowing costs for the greenback fell to a record amid the easing credit crunch.

“The Telegraph article enhanced views the Bank of England can’t exit its accommodative monetary policy stance any time soon,” said Akira Hoshino, chief manager of the foreign exchange trading department at the Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s largest banking group. “Receding hopes for an imminent exit will put pressure on the pound.”

The pound declined to $1.6370 as of 10:57 a.m. in Tokyo from $1.6453 in New York yesterday, after earlier reaching $1.6369, the lowest level since Sept. 8. The U.K. currency dropped to 149.37 yen from 149.86 yen.

Australia’s currency traded at 86.84 U.S. cents from 87.28 cents in New York yesterday, when it touched 87.75 cents, the highest since Aug. 22, 2008. New Zealand’s dollar bought 70.92 U.S. cents from 71.07 cents in New York yesterday, when it reached 71.58 cents, also the most since Aug. 22, 2008.

Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

The cost of three-month loans in dollars between banks held yesterday at a record low of 0.292 percent, according to the British Bankers’ Association. The London interbank offered rate, or Libor, is lower than that of the yen and Swiss franc, making the dollar the cheapest funding currency.