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UK pound drops on election fears UK pound drops on election fears
(10 minutes later)
The pound has tumbled to a 10-month low as fears grow the UK will have a hung parliament in the upcoming election.The pound has tumbled to a 10-month low as fears grow the UK will have a hung parliament in the upcoming election.
The currency fell 1.6% to drop below the $1.50 level against the dollar for the first time since May. It has lost 7% against the dollar this year.The currency fell 1.6% to drop below the $1.50 level against the dollar for the first time since May. It has lost 7% against the dollar this year.
The pound also fell against the euro and most other major currencies.The pound also fell against the euro and most other major currencies.
Separately, the world's biggest bond fund manager Pimco told the BBC he is concerned about UK government debt unless drastic action is taken.Separately, the world's biggest bond fund manager Pimco told the BBC he is concerned about UK government debt unless drastic action is taken.
POUND STERLING V US DOLLARLast updated: 01 Mar 2010, 12:56 UK £1 buyschange%1.4907-0.0341-2.24 More data on this currency pair POUND STERLING V US DOLLARLast updated: 01 Mar 2010, 13:06 UK £1 buyschange%1.4886-0.0363-2.38 More data on this currency pair
According to a YouGov poll published in the Sunday Times, the Conservative lead over Labour has narrowed to two points - down from six points last week - the lowest in two years.According to a YouGov poll published in the Sunday Times, the Conservative lead over Labour has narrowed to two points - down from six points last week - the lowest in two years.
This could give Labour 317 seats, nine short of an overall majority, with the Tories on a total of 263 MPs.This could give Labour 317 seats, nine short of an overall majority, with the Tories on a total of 263 MPs.
A hung parliament - where no party has a majority - would make it harder to pass legislation and could hurt the nascent economic recovery.A hung parliament - where no party has a majority - would make it harder to pass legislation and could hurt the nascent economic recovery.
Prime Minister Gordon Brown has to call a general election by June.Prime Minister Gordon Brown has to call a general election by June.
Buyer's remorse?Buyer's remorse?
Pimco's head, Mohamed El-Erian, told the BBC the UK's creditors would become "significantly concerned" if the UK did not cut spending and grow quickly.Pimco's head, Mohamed El-Erian, told the BBC the UK's creditors would become "significantly concerned" if the UK did not cut spending and grow quickly.
He also expressed concern over other European nations with troubled public finances - such as Greece and Spain.He also expressed concern over other European nations with troubled public finances - such as Greece and Spain.
Governments need companies such as Pimco to keep buying their debt.Governments need companies such as Pimco to keep buying their debt.
If large bond buyers believe that governments will default on their debt or that they will keep falling in value, they will not buy the debt - further driving up the cost of borrowing for those countries.If large bond buyers believe that governments will default on their debt or that they will keep falling in value, they will not buy the debt - further driving up the cost of borrowing for those countries.
The UK's total borrowing for the financial year now totals more than £122bn.The UK's total borrowing for the financial year now totals more than £122bn.
Mr El-Erian told the BBC World Service: "If the UK cannot combine higher growth with fiscal adjustment, then its debt dynamics will continue to deteriorate to a point where its creditors will become significantly concerned."Mr El-Erian told the BBC World Service: "If the UK cannot combine higher growth with fiscal adjustment, then its debt dynamics will continue to deteriorate to a point where its creditors will become significantly concerned."
He added that there was only a "very small" chance that the UK would default on its debt.He added that there was only a "very small" chance that the UK would default on its debt.
Mr El-Erian previously was in charge of Harvard University's $30bn endowment fund.Mr El-Erian previously was in charge of Harvard University's $30bn endowment fund.
Pimco - or the Pacific Investment Management Company - is based in California and has more than $1 trillion of assets under management. It is a unit of German insurance giant Allianz.Pimco - or the Pacific Investment Management Company - is based in California and has more than $1 trillion of assets under management. It is a unit of German insurance giant Allianz.