By Lukanyo Mnyanda April 16 (Bloomberg) -- The pound fell the most in more than a week against the dollar as polls on the U.K.’s first televised campaign debate signaled neither of the major parties has enough support for a clear majority at the May election. Britain’s currency also pared its weekly advance versus the euro after surveys indicated Liberal Democrat Nick Clegg emerged as the winner in yesterday’s debate against Prime Minister Gordon Brown and Conservative leader David Cameron. The pound declined against the yen as measures taken by China to cool its economy boosted demand for the relative safety of the Japanese currency. “Sterling is still beholden to concerns about the political dynamic,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “The increase in the hung-parliament scenario is one of the factors” that is weakening sterling, he said. The pound declined 0.2 percent to $1.5460 as of 11 a.m. in London, after earlier slipping by 0.8 percent, the most since April 7. It depreciated by 0.1 percent to 87.68 pence per euro, cutting its weekly gain to 0.1 percent. The pound slid 0.7 percent to 143.18 yen. While Cameron says his party would shrink the size of the state and go further and faster than Labour in cutting the deficit, polls indicate he may not win enough seats to govern on his own. Brown says reducing government spending too quickly would harm the U.K.’s economic recovery. Concern an incoming government may not have sufficient parliamentary support to cut the budget deficit, the largest in the Group of Seven nations, helped send the pound 4.4 percent lower against the dollar this year. Rally ‘Freeze’ A Populus poll for the Times of London of more than 620 voters showed 61 percent judged Clegg to have won yesterday’s debate, compared with 22 percent for Cameron and 17 percent for Brown. A YouGov daily poll published before the debate showed the Conservative lead over Labour narrowing to six points from nine. “Fears of a hung parliament resurfaced after Clegg won the first debate, freezing a new pound rally” against the dollar, analysts including Roberto Mialich, a senior strategist at UniCredit SpA in Milan, wrote in a note today. The currency may weaken toward 90 pence per euro as the May 6 vote approaches, they wrote. The pound fell even as the Centre for Economic and Business Research raised its forecast for U.K. growth in the next two years. Britain’s economy will expand 1.3 percent next year, up from an earlier prediction for 0.8 percent, the London-based independent research group said in an e-mailed statement. U.K. government bonds rose, with the 10-year yield falling 3 basis points to 4 percent. The two-year note yield also dropped 3 basis points, to 1.14 percent. Gilts return 0.6 percent in 2010, compared with a 2.7 percent advance for German securities, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

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