LONDON (Reuters) - The pound slipped on Tuesday on political uncertainty and concern about Britain's bloated public deficit, staying below $1.50 but off lows hit in Monday's sharp fall.
The pound fell more than four cents to a 10-month low against the dollar on Monday as a weekend poll indicated the ruling Labour Party would remain in power albeit without a clear majority.
The prospect of a hung parliament after an election expected in May raised concerns about whether Britain's ballooning budget deficit would be dealt with effectively if no one party gained a clear majority.
A new opinion poll published on Tuesday showed the opposition Conservatives regaining their advantage, while another one showed their lead shrinking. Both still suggested Britain was heading for a hung parliament.
By 8:37 a.m. British time, the pound was down 0.3 percent on the day at $1.4933, but held above Monday's 10-month lows of $1.4781.
Traders said the market was still expected to sell into any rallies, particularly above $1.50.
"Sentiment is still pretty negative, and there are no reasons to actively buy sterling," said one London-based trader.
A YouGov poll in the Sun tabloid, which backs the Conservatives, had the party's lead extended to 7 points.
But the ComRes poll in the Independent newspaper had the Conservative Party's lead at 5 points, down two from last month's poll -- meaning ruling Labour could remain the largest party in parliament after the vote.
The market will keep an eye on a 2 billion pound auction of 2039 conventional Gilts later in the day to gauge investor confidence. Any sign of weak demand for UK government paper would hurt the pound, traders said.
UK gilt futures fell to four-day lows on Monday as concerns flared about UK public finances.
Against the euro, the pound was down 0.1 percent at 90.54 pence. It hit a four-month high of 91.50 pence on Monday.
The euro was also under pressure due to Greece's debt problems, but Athens looked to be nearing a deal with EU governments for some form of aid in exchange for more stringent fiscal steps.
"Should a bailout of Greece approach it cannot be excluded that market attention is increasingly going to concentrate on Great Britain," analysts at Commerzbank said in a note.
Sterling hit a 25-year low against the Canadian dollar on Tuesday while it hovered near 25-year lows against the Australian dollar.
(Reporting by Tamawa Desai)