Sept. 6 (Bloomberg) -- The pound dropped against the dollar and gilts rose for the first day in four amid speculation signs of a slowing economy will prompt policy makers to consider increasing asset purchases at a central bank meeting this week. The pound fell against all 16 of its most-traded peers. Data on Sept. 3 showed futures traders increased bets the currency will drop against the dollar last week as an index of U.K. services activity dropped in July to the lowest level since April 2009. Short-sterling futures rose as investors added to bets interest rates will stay lower for longer. “There is going to be some building momentum for the bank to at least discuss the prospect of coming back to the quantitative-easing agenda,” said Jeremy Stretch, global head of foreign-exchange strategy at Canadian Imperial Bank of Commerce’s CIBC World Markets unit in London. “Sterling may struggle a little bit as people reassess the durability of the U.K. recovery.” The pound fell 0.4 percent to $1.5392 as of 10:07 a.m. in London and weakened 0.3 percent to 83.71 pence per euro. The difference in the number of wagers by hedge funds and other large speculators on a decline in the pound compared with those on a gain -- so-called net shorts -- was 15,266 on Aug. 31, compared with net shorts of 4,365 a week earlier, according to figures from the Washington-based Commodity Futures Trading Commission. The yield on the benchmark 10-year bond fell 4 basis points to 2.96 percent and the two-year note yield also dropped 4 basis points to 0.68 percent. “There is momentum in gilts still, and when you see the U.K. numbers starting to deteriorate you should see them performing well,” said Kenneth Broux, a senior market economist at Lloyds Banking Group Plc in London. Investors will focus on the prospects for more quantitative easing, he said. The yield on short-sterling futures for December 2011 fell 3 basis points to 1.78 percent. The Bank of England will keep its main interest rate at 0.50 percent and hold asset purchases at 200 billion pounds ($309 billion), according to Bloomberg surveys. --Editors: Keith Campbell, David Clarke. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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