* Pound on defensive on concerns about hung parliament
* UK QE, Prudential purchase of AIG Asia unit watched
* Euro keeps some gains but short positions at record high
* Aussie trims gains on softer China PMI but rate view helps
By Kaori Kaneko
TOKYO, March 1 (Reuters) - Sterling fell to a nine-month low
against the dollar and a one-year low on the yen on Monday, hurt
by political uncertainty after an opinion poll showed chances of
an inconclusive result in a British election due in months.
Speculation Britain could revive its asset buying programme,
after the Bank of England said last week it might take such a
step if the economic outlook worsened, continued to weigh on the
pound along with expectations of a sterling outflow from
Prudential's <PRU.L> purchase of the Asian unit of AIG <AIG.N>.
[]
An opinion poll out on Sunday suggested Britain's ruling
Labour Party could remain the biggest party after this year's
general election but without a majority in parliament, a result
which could hamper decision-making and undermine a fragile UK
recovery.
Traders said the news prompted many to add to short positions
in the pound, sending it as low as $1.5129 <GBP=D4>. It has shed
more than 6 percent this year against the dollar.
"The latest concerns about the pound are from the likelihood
of a hung parliament," said Richard Grace, chief currency
strategist at Commonwealth Bank, Sydney. "The U.S. dollar's gains
are also adding to the weakness in the pound."
Sterling also fell to its lowest in a year on the yen,
dropping to around 134.50 yen <GBPJPY=R>, and the euro rose 0.3
percent to 89.73 pence <EURGBP=D4>.
The BOE holds a rate meeting on Thursday and while analysts
expect it to hold rates at 0.5 percent and maintain the pause in
its quantitative easing programme, market players will look for
any hints about its asset-buying measures.
"The monetary policy direction of the U.S. and UK has become
clearer. The Fed is viewed as heading towards tightening while
the Bank of England is on the opposite side," said a trader at a
Japanese bank.
American International Group Inc <AIG.N> agreed to a $35.5
billion sale of its Asian life insurance unit to Prudential Plc
<PRU.L>, sources said, with Prudential set to pay $25 billion in
cash and the rest in equity. []
The dollar index <.DXY> edged up 0.2 percent to 80.52,
supported at the margins by improving U.S. economic data.
The Australian dollar <AUD=D4> rose about 0.2 percent to
$0.8975 <AUD=D4>, after strong data added to investor speculation
that the Reserve Bank of Australia would lift the cash rate to 4
percent at its monthly policy meeting on Tuesday.
Australia's trade deficit widened last quarter as the
relative strength of domestic demand and business investment
sucked in imports, while companies reported healthly sales and
improving profits.[]
The Aussie rose 0.4 percent against the yen to 79.95 yen
<AUDJPY=R>, drawing support earlier from higher copper prices
after Saturday's earthquake in Chile, but data showing the pace
of Chinese manufacturing eased last month capped gains in the
currency.[]
Traders said despite a recent bounce sentiment on the euro
remained negative. Data from the Commodity Futures Trading
Commission showed net short euro positions rose to 71,623
contracts in the week to Feb. 23, a fresh record, up from 59,422
contracts in the prior week.
The euro <EUR=> dipped 0.1 percent to $1.3612 from late on
Friday, when it gained 0.4 percent. It was boosted by speculation
that euro zone policymakers were close to agreeing a deal to bail
out debt-laden Greece. [].
Traders said the risk of the euro falling further would
increase if it ended this week below a chart support around
$1.3485, which would be a 61.8 percent retracement of a move up
to the November high of $1.5145 from a March low of $1.2457.
IMM data shows long U.S. dollar positions at their highest
since Sept 2008, with short euro positions at a record peak.
[]
Speculators also added to long positions in the dollar and
the yen. The dollar stood at 89.10 yen <JPY=>, up 0.1 percent
from its lowest levels in a month near 88.70.
The focus this week will be on U.S. jobless data due on
Friday, which will give clues on consumer spending. Forecasts are
for a loss a of 50,000 jobs in February, with the jobless rate
seen ticking back up to 9.8 percent. [].
The European Central Bank is also scheduled to meet and while
it is expected to keep rates unchanged attention will be on any
mention of the continent's highly indebted trouble spots such as
Greece, Portugal, Spain and Ireland. []
(Additional reporting by Anirban Nag in Sydney and Satomi
Noguchi in Tokyo; Editing by Michael Watson)
