Sterling falls vs dlr; BoE comments still weigh

* Sterling hits one-week low vs dollar of $1.6515

* Sentiment still negative after BoE chief's QE comment

* Stg turns higher vs euro after earlier hitting 2-wk low

By Jessica Mortimer

LONDON, Nov 12 (Reuters) - Sterling hit a one-week low against the dollar on Thursday, staying weak after comments from the Bank of England governor the previous session while disappointing U.S. data propped up the safe-haven U.S. currency.

Sterling rose against the euro, however, coming off an earlier two-week low, with traders citing selling of euros versus sterling by corporate accounts.

Analysts said sentiment towards the pound remained negative after comments on Wednesday by BoE chief Mervyn King suggested the central bank was leaving the door open to more asset purchases and he highlighted the benefits of a weak currency.

"The market's still reading Mervyn King's comments to be on the dovish side," said Paul Mackel, director of currency strategy at HSBC.

"At the end of the day the Bank of England is still dovish, it is still expanding QE, and although sterling is undervalued versus the euro I can't see it's at the key turning point where it's going to correct just yet," he said.

The Bank of England last week opted to expand asset purchases under its quantitative easing programme by a further 25 billion pounds, taking its target to 200 billion pounds.

King spoke on Wednesday after the release of the central bank's quarterly Inflation Report, which showed UK consumer prices will be below its 2 percent target in two years. [ID:nLB401867] [ID:nLB169687]

At 1620 GMT, the pound fell 0.3 percent against the dollar to $1.6523 GBP=D4, just shy of an earlier one-week low of $1.6515.

The dollar was broadly supported after a report showing initial U.S. weekly jobless claims were lower than expected encouraged buying of the U.S. currency as investors chose to shun currencies perceived to be riskier.

The euro EURGBP=D4 fell 0.5 percent versus the pound at 89.94 pence, with traders saying it broke below a key support around the 90.10 pence level. It had earlier hit a two-week high of 90.66 pence.

The pound's trade-weighted index =GBP rose on the day to 80.5. Earlier, it fell to 80.1, its lowest in more than a week.

Analysts expect the pound to stay weak against the euro as monetary policy interest rates in the UK are seen staying at ultra-low levels for longer than rates in the euro zone.

Euro zone preliminary data due on Friday are expected to show the single currency bloc came out of recession in the third quarter. This would contrast sharply with the UK, where recent data showed GDP unexpectedly still contracting. [ID:nL6700845]

Sterling has come under heavy pressure recently, falling close to $1.57 and 94 pence per euro in October, on the view UK interest rates will stay low for longer than those of other countries and on concerns about a deteriorating fiscal position.

"Clearly King favours a weak pound and we hold the view that policy uncertainty may restrict sterling upside in the short term," UBS analysts said in a note. (Reporting by Jessica Mortimer; Editing by Andy Bruce)