By Paul Dobson March 3 (Bloomberg) -- The pound snapped its longest run of declines against the dollar in 16 months as U.K. consumer confidence rose last month to a two-year high and services expanded at the fastest pace in three years. The pound rose against 15 of its 16 most-traded peers as Nationwide Building Society’s gauge of sentiment increased to 80, compared with economist estimates for the index to be at 73. The euro gained a second day against the dollar after Greece outlined 4.8 billion euros ($6.55 billion) of spending cuts and tax rises to convince investors the nation can tame the European Union’s biggest budget gap. “Nationwide obviously came in above expectations and that was a reason for sterling to consolidate,” said Ulrich Leuchtmann, chief currency strategist at Commerzbank AG in Frankfurt. Greece’s austerity package “is a fundamental improvement to what we’ve been seeing before.” The pound rose 0.4 percent against the dollar to $1.5030 as of 11:30 a.m. in London, its first advance in seven days, from $1.4971 yesterday. It strengthened 90.78 pence per euro from 90.94 pence. The euro was at $1.3648 from $1.3615, and traded at 121.15 yen, from 120.96 yen. The pound slid this week to the lowest level since May 1 on speculation an election this year will result in a government that’s too weak to reduce the nation’s deficit. Sterling rebounded today, helped by speculation a slump in Prudential Plc shares will hamper its takeover bid for AIA Group Ltd., easing concern that capital will leave the U.K. ‘Unique Opportunity’ Prudential, Britain’s largest insurer, slid almost 20 percent in London trading the past two days after it said it will buy American International Group Inc.’s Asian unit for $35.5 billion in cash and stock. “We believe this is a unique opportunity to create a leading pan-Asian insurer and will create long-term value for shareholders,” Prudential spokesman Edward Brewster said today. A currency hedge was put in place before the deal was announced, he said. An index based on replies from about 700 service companies jumped to 58.4 from 54.5 in January, the Chartered Institute of Purchasing and Supply and Markit Economics said in a statement today in London. The median forecast of 29 economists in a Bloomberg survey was 55. A reading above 50 indicates expansion. The euro has fallen 4.9 percent against the dollar this year amid mounting concern Greece will struggle to narrow its deficit will hamper the region’s recovery. Greek Prime Minister George Papandreou today announced the measures that include plans for higher tobacco, alcohol and sales taxes. ‘Bad News’ “A lot of bad news had been priced into the euro,” said David Woo, global head of foreign-exchange strategy at Barclays Plc in London. “This is a move in the right direction because the possibility of an EU rescue package is now more likely. For the short-term it’s a positive because the crisis may abate.” The U.S. is asking hedge funds not to destroy trading records on euro bets, according to a person with knowledge of the requests, as Europe and the U.S. step up scrutiny of the funds’ role in the Greek debt crisis. The Department of Justice sent requests to save the records to at least some of the hedge funds whose executives attended a dinner hosted by New York-based research and brokerage firm Monness, Crespi, Hardt & Co. on Feb. 8, said the person, who declined to be identified because the information is private. The European Commission said yesterday it will investigate trades in sovereign credit-default swaps in the wake of the Greek crisis, which prompted officials to warn hedge funds they shouldn’t try to profit from the woes of the region’s nations. One of 23 themes discussed at the Feb. 8 dinner was a wager that the euro would fall against the dollar, according to an agenda obtained by Bloomberg News. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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