* Sterling near 2-1/2 year low versus dollar
* FOMC hints at pullback in bond buying, contrasts with BoE
* Public sector borrowing data at 0930 GMT
By Anooja Debnath
LONDON, Feb 21 Sterling fell to a fresh
two-and-a-half year low against the dollar on Thursday and was
likely to remain vulnerable after Bank of England minutes showed
policymakers edging closer towards looser monetary policy.
BoE minutes contrasted with U.S. Federal Reserve's policy
minutes showing some policymakers thought the pace of
bond-buying should be stopped or reduced.
Sterling slid as low as $1.5130 on Thursday, its
lowest since July 2010, before recovering some of its losses to
last trade down 0.3 percent on the day at $1.5195.
Traders said a U.S. macro hedge fund was cited as the main
buyer of sterling/dollar this morning, helping to lift it off
"The intensity of the sterling move lower in the last 24
hours has been a toxic mix of the BoE voting to do a little bit
more quantitative easing and the Fed saying they might end their
(bond purchases)," said Kathleen Brooks, research director at
"The Fed minutes suggested that their balance sheet could
shrink faster than the BoE's."
Brooks said if sterling broke below $1.50, it could easily
slide towards $1.45. Against a trade-weighted basket of
currencies the pound matched the 17-month low of 78.7 hit
The pound recovered some of its losses against the euro,
however as weak German and French data weighed on the single
The euro was down 0.3 percent on the day at
87.00 pence, having hit a near 16-month high of 87.645 pence on
Minutes from the BoE's latest policy meeting showed outgoing
Governor Mervyn King and two others voted to relaunch asset
purchases under its quantitative easing (QE) programme. The vote
against extending QE was 6-3, closer than the forecast for an
Policymakers also considered expanding the range of assets
they purchased under QE -- typically negative for a currency
because pumping more money into the economy increases the supply
-- and cutting interest rates.
"The dovish BoE MPC minutes took sterling/dollar sharply
lower yesterday but the pace of (the move) down has somewhat
surprised us, the Fed minutes took sterling/dollar lower
breaking through key resistance levels and has found a base
around 1.5150 for now," analysts at Lloyds Bank said in a note.
The BoE also indicated it is prepared to allow inflation to
remain above its 2 percent target beyond the two-year horizon
outlined in its mandate.
The British currency's outlook has been bleak due to fears
of a downgrade of the UK's triple-A credit rating and
deteriorating economic conditions.
Public sector borrowing figures for January due at 0930 GMT.
A worse-than-expected figure may increase concerns about the
UK's debt problems and weigh on the pound, although analysts did
not expect a significant impact.
(Editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)