Sterling falls as BoE highlights downside risk to pound

LONDON, March 26 (Reuters) - Sterling wiped out earlier gains versus the dollar and extended losses against the euro on Wednesday after Bank of England policymaker Charles Bean said risks to sterling were to the downside.

By 0958 GMT, the pound stood at $2.0036 GBP=, down almost 0.1 percent on the day. The euro extended its earlier gains to 78.41 pence EURGBP=, heading for a recent record high at 79.12 pence.

Sterling had gained earlier after BoE governor Mervyn King said that inflation was seen rising to around 3 percent.

“Effectively we had Charles Bean saying that in all likelihood sterling will weaken.. It’s very rare for a central bank to actualy come out and admit that, so it’s going to be a signal that sterling is going to be falling further over the next few months,” said James Knightley, senior economist at ING.

King and Bean were speaking at a UK Treasury Committee hearing.

Reporting by Toni Vorboyova and Veronica Brown