* Hopes for Greece deal help euro, but uncertainties remain
* Sterling falls sharply on concerns about hung parliament
* Planned Prudential buy of AIG Asia unit also dents pound
LONDON, March 1 (Reuters) - The euro was steady against the dollar on Monday on hopes that a support deal for Greece may be near, while sterling slid to its lowest in more than nine months versus the dollar as UK political uncertainty increased.
Sterling was by far the biggest mover among major currencies, shedding well over one percent against the dollar and the euro after a poll showed a growing risk no party will win a majority in an election due by June 3. [ID:nLDE61R07C]
This increased investor concerns that an incoming government would not be able to implement measures needed to cut UK debt. News Britain's Prudential Plc PRU.L was in talks to buy AIG's AIG.N Asian arm further dented the pound. [ID:nWLB8697] [GBP/]
The euro gained support as the market speculated that a visit by EU Economic Affairs Commissioner Olli Rehn and European Central Bank Executive Board member Juergen Stark to Athens could move EU governments closer to a deal on emergency aid. [ID:nLDE6200RI]
Concerns about debt-stricken Greece have undermined investor confidence in the single currency recently, although uncertainty over whether other EU governments will agree to support the country remained as German Chancellor Angela Merkel stressed no decision had been taken. [ID:nLDE61R0BX]
“A possible deal with Greece is helping but it is not enough to remove the worries about the debt situation in southern Europe and it has not sparked a strong euro rally,” said Niels Christensen, currency strategist at Nordea.
Sterling GBP=D4 also fell more than one and a half percent against the dollar to $1.4995, its first foray below $1.50 since May 2009. It has shed more than 6 percent against the dollar this year.
“Sterling remains under major pressure on its political/fiscal woes, with latest opinion polls suggesting a very tight election in early May,” ING analysts said in a note.
EURO SHORT POSITIONS
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 a fresh record in the week to Feb. 23. [IMM/FX]
Nordea’s Christensen said this was probably deterring investors from adding further to euro short positions, while focus was switching to central bank meetings in the euro zone and UK on Thursday and key data this week. [ECB/INT] [BOE/INT]
Surveys on Monday showed manufacturing activity in the euro zone grew slightly faster than previously thought last month, though Spain and Greece continued to lag far behind. Euro zone unemployment was stable. [nLDE6200O4] [ID:nLDE6200NO]
U.S. ISM data on manufacturing activity is due at 1500 GMT. ECONUS
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.
The dollar index .DXY rose 0.3 percent to 80.612, while the U.S. currency gained 0.5 percent against the yen JPY= to 89.25 yen as rising equity markets stoked some appetite for risk, weighing on the low-yielding currency.
The Australian dollar AUD=D4 rose 0.4 percent to $0.8980 AUD=D4, after strong data added to investor speculation that the Reserve Bank of Australia would lift the cash rate to 4 percent at a policy meeting on Tuesday. [ID:nSGE61R02I]
The Aussie also drew support from higher copper prices after Saturday’s earthquake in Chile. [MET/L]
Additional reporting by Kaori Kaneko in Tokyo; editing by Patrick Graham
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