LONDON: Sterling rose to a near two-week high against the dollar on Wednesday, helped by Bank of England minutes suggesting more monetary easing was unlikely next month.
The minutes revealed only one vote at this month's policy meeting for more quantitative easing, giving the pound a small boost because some in the market had seen a risk of more support for QE, which is normally see as cheapening a currency by increasing its supply.
But analysts said the pound's gains may be limited because the minutes suggested more QE was still possible in 2013.
The pound rose to $1.5939, its strongest since Nov. 9, as it continued to recover from last week's two-month low of $1.5828. But traders said it may struggle to make more gains due to reported offers up to $1.5950.
The BoE minutes said policymakers felt a case could be made for a further easing in monetary conditions in order to help boost the economy, in part by discouraging any further appreciation of sterling.
Weak public sector borrowing data also highlighted concerns about whether a weak UK economy may hamper efforts to cut the deficit.
"There is not much to like about the pound at the moment ... A central bank that says it doesn't mind having a weaker currency will not get a stronger one," said Kit Juckes, currency strategist at Societe Generale.
"If the pound were to break below the $1.5850 area it could accelerate those losses and fall towards $1.56 or $1.55."
The pound also rose against the euro after euro zone officials and the International Monetary Fund ended 12 hours of talks without a deal on Greece's next batch of aid.
But the euro pared losses as German Chancellor Angela Merkel told a closed-door meeting of lawmakers that lower interest rates and an expanded EFSF rescue fund could fill Greece's financing gap.
The euro was down 0.15 percent at 80.35 pence, having earlier hit a one-week low of 80.07 pence.
More falls could pull the euro towards chart support around 79.85 pence, marking a trendline drawn from the euro's 2012 low of 77.56 pence hit in July, and then the 100-day moving average at 79.64 pence.
"Short-term sterling stands to gain from anti-euro trades," said John Hardy, currency strategist at Saxo, referring to investors looking to find alternatives to the euro if uncertainty over Greek funding continues.
Elsewhere, the pound rose to a seven-month high against the yen of 131.26 yen as the Japanese currency came under broad selling pressure on speculation of more monetary easing in Japan.
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