Aug. 23 — The pound rose above $2 for the first time in more than a week as investors added to bets the Bank of England will raise interest rates.

The U.K. currency also gained as the risk of owning corporate bonds in Europe fell to the lowest in more than a month after Bank of America Corp. stepped in to support the biggest U.S. mortgage lender. The yen was among the biggest decliners against the pound as waning concern that a crisis in credit markets encouraged investors to return to carry trades.

“The BOE is either going to stay on hold or raise rates, but it’s definitely not going to cut,” said Niels From, a currency strategist at Dresdner Kleinwort in Frankfurt in London. “That’s going to be supportive for the pound.’‘

The pound traded above the $2 mark for the first time since Aug. 14, climbing 0.6 percent to $2.004 by 5:21 p.m. in London, after earlier reaching 2.009, from $1.9928 yesterday.

Investors expect the BOE to raise its benchmark rate a further quarter-point to 6 percent by the end of this year. The implied yield on the December interest-rate futures contract rose 4 basis points to 6.17 percent.

Investors raised bets after economic reports showed a pick- up in U.K. manufacturing and rising business investment suggesting five interest-rate increases in a year have yet to cool growth.

Corporate spending on equipment, vehicles and buildings rose a seasonally adjusted 0.8 percent from the first three months, the Office for National Statistics said today. An index of U.K. factory orders rose the highest in 12 years in August, a Confederation of British Industry survey showed yesterday.

High-Risk

Contracts on the iTraxx Crossover Series 7 Index of 50 companies with mainly high-risk, high-yield debt, reached the lowest since July 17, when Bear Stearns Cos. told investors that two hedge funds linked to subprime debt were almost worthless. The index dropped 10 basis points to 314 basis points at 3:02 p.m. in London and earlier fell to 302, Deutsche Bank prices show.

The yield on the 10-year U.K. gilt fell 3 basis points to 5.06 percent. The price of the 4 percent gilt due September 2016 rose 0.27, or 25 pence per 1,000-pound ($2,004) face amount, to 92.40.

Countrywide said it sold $2 billion of preferred stock to Bank of America Corp. The mortgage company was among lenders that drove investors to the safety of government debt in the past month because of losses tied to a U.S. housing slowdown.

Fed fund futures showed traders saw a 44 percent chance of a half-point cut in the benchmark U.S. rate to 4.75 percent next month, and a 56 percent chance of a move to 5 percent.