By Keith Jenkins and Candice Zachariahs March 15 (Bloomberg) -- The euro snapped three days of gains versus the dollar after some European finance ministers ruled out aid for Greece as it seeks to narrow a budget deficit that is the largest in the common-currency region. The euro weakened most against the New Zealand and Canadian dollars. German Finance Minister Wolfgang Schaeuble and French Finance Minister Christine Lagarde damped speculation at the weekend that there will be a decision on aid for Greece at a two-day meeting in Brussels starting today. The pound fell against the dollar as a YouGov Plc poll published in yesterday’s Sunday Times reinforced concern Britain’s election this year will produce a government without a parliamentary majority. “We’re seeing the euro react negatively to a story which has come around at least twice in the course of the last month,” said Simon Derrick, chief currency strategist at BNY Mellon Corp. in London. “If you need to guarantee Greece, you’re passing the problem in effect to anyone who provides bilateral loans.” The euro declined as much as 0.5 percent to $1.3701 and was at $1.3704 as of 7 a.m. in New York. It gained 0.3 percent to 124.33 yen. Sterling fell 1.2 percent to $1.5022. The euro has fallen 4.2 percent this year against the dollar amid concern Greece’s rising debt-servicing costs will prevent it from narrowing a budget deficit that is more than four times the European Union’s 3 percent limit. Of the euro’s 16 most-actively traded peers, only sterling has lost more against the U.S. currency, tumbling 7 percent since Dec. 31. Schaeuble, Lagarde Finance ministers from the 16 euro countries meet at 5 p.m. today, followed by a meeting of all 27 EU finance ministers at 9 a.m. tomorrow. Also on the agenda are proposals to clamp down on hedge funds and credit default swaps. “There will be no reason to make decisions about financial aid” for Greece, Schaeuble told Bild Zeitung yesterday. Lagarde said a day earlier “there won’t be any decision made or any button pressed.” Speaking to reporters in New York, she said “certainly we are not at the stage where we need to opt” for a specific course of action. The Dollar Index gained for the first time in four days as investors sought the U.S. currency as a haven after Chinese Premier Wen Jiabao rebuffed calls for the yuan, or renminbi, to appreciate, risking a worsening of relations with the U.S. “I don’t think the renminbi is undervalued,” Wen said yesterday, using another term for the yuan. He also said at the press conference in Beijing “we oppose countries pointing fingers at each other and even forcing a country to appreciate its currency.” The Dollar Index, which tracks the currency against those of six major U.S. trading partners, rose 0.3 percent to 80.10. ‘Double Dip’ In its semi-annual report to Congress in October, the U.S. Treasury Department criticized China for the “lack of flexibility” of the yuan and a buildup of foreign-exchange reserves, while stopping short of branding the country a currency manipulator. The dollar also advanced as stocks fell, with the MSCI World Index declining 0.2 percent, on concern that China and India will seek to restrict economic growth to curb inflation. The Chinese premier said ballooning sovereign debt and high unemployment worldwide could send the global economy into a “double dip” slump. “That’s not the rosy, upbeat picture that foreign-exchange traders have been running with and Wen’s comments have left some concern emanating through Asia,” said Robert Rennie, head of currency research at Westpac Banking Corp. in Sydney. “It has seen the U.S. dollar firmer within Asia and that may continue in the short term.” U.K. Debt Servicing The British currency slipped for the first time in three days versus the euro on concern that the U.K. will have difficulty in servicing its ballooning debt after the nation’s elections, which must be held by June. Yesterday’s YouGov Plc poll showed Labour at 33 percent and the Conservatives at 37 percent. Because of the uneven distribution of votes across districts, Labour would get 302 seats in the 650-member parliament and the Conservatives 277, with no party having a majority, the Times said. No margin of error was provided. The U.K. and U.S. governments must balance bringing down their debt burdens without damaging growth by removing fiscal stimulus too quickly, according to Pierre Cailleteau, managing director of sovereign risk at Moody’s in London. Under the ratings company’s baseline scenario, the U.K. will spend more on debt service as a percentage of revenue this year than any other top-rated country, Moody’s said in a report published today. Sterling Bears “Moody’s is sending a timely reminder that there are no cost-free options out there,” said Adrian Foster, head of financial-markets research for Asia at Rabobank Groep NV in Hong Kong. “On the one hand, you risk weakening your economy. On the other hand, you risk weakening your credit rating. You wouldn’t want to own” the pound, he said. Futures traders are more bearish than ever on sterling amid concern that the currency’s declines will continue as the U.K.’s budget gap approaches the Greek shortfall. Greece’s deficit at 12.7 percent of gross domestic product was the European Union’s largest in 2009. Hedge funds and large speculators had 67,549 more bets that the pound would decline against the dollar than contracts that profit from a rise as of March 2, data from the Commodity Futures Trading Commission in Washington show. Futures traders haven’t been that bearish since at least January 1986, as far back as CFTC data go. The so-called net-short position has averaged 60,548 in the five weeks to March 9, compared with about 7,200 in October 1992, the year that George Soros made $1 billion betting against the currency. To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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