FOREX-Dollar off lows as sterling feels the heat

* Dollar off three-month lows after snapping losing streak

* Sterling under pressure, May 7 election in focus

* China PMI up next as Japan enjoys Golden Week holiday

By Ian Chua

SYDNEY, May 4 (Reuters) - The dollar clung onto tenuous gains early on Monday, having staged a modest rebound late last week as sellers set their sights on sterling after disappointing UK data.

Already on tenterhooks ahead of the May 7 general election, the pound was further stung by a survey showing British manufacturing growth slowed sharply in April.

It last stood at $1.5146, having shed more than 1 percent on Friday. The euro fetched 73.83 pence following a 1.2 percent rally.

"We expect sterling to remain under pressure at least until the political fog lifts," analysts at ANZ wrote in a note to clients, recommending investors stay short sterling against the Australian, New Zealand and Canadian dollars.

Britons will vote on Thursday in what is expected to be the tightest election in decades. A YouGov (LSE: YOU.L - news) opinion poll for the Sun newspaper published on Sunday showed Prime Minister David Cameron's Conservative Party had a mere one-point lead over the opposition Labour Party.

With sterling under pressure, the dollar staged a bit of a comeback. The dollar index last traded at 95.292, having risen 0.7 percent on Friday following seven consecutive sessions of declines.

It was still not far from a two-month trough of 94.399 plumbed Thursday. A string of disappointing U.S. data has convinced investors that the Federal Reserve will be in no hurry to lift interest rates, which have been near zero since December 2008.

Yet, two top U.S. central bankers said on Friday the Fed could well raise rates as soon as June, so long as economic data strengthens as expected from a dismal first quarter.

The euro traded at $1.1187, having retreated from a two-month peak of $1.1290 set on Friday.

Against the yen, the dollar held above 120.00 after touching a three-week high of 120.29 on Friday. The common currency was at 134.49 yen, having topped out at 135.29 on Friday.

The focus in Asia is a private survey on China's manufacturing activity for April due at 0145 GMT.

Last Friday, the official report showed China's factories remained stuck in low gear, so confirmation of subdued activity will only cement expectations for more stimulus.

Trading could be choppy with liquidity likely to be affected by a holiday in Japan. Japanese markets are shut for the so-called Golden Week holiday and will reopen on Thursday.