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Sterling extended its losses to $1.6050 following the dovish BOE report.
Earlier the pound gained as rising UK inflation cemented expectations of an early rate hike. But Mervyn King whittled those expectations when he said that no decision made on Mar rate decision and people running ahead of themselves on rate hikes.
Sterling rallied to a 5-½ month peak against a currency basket after data showing UK inflation jumped to twice the Bank of England's target.
Meanwhile, money markets have already priced in three rate hikes by the end of the year.
The dollar held firm against the yen, after rising steadily in the past nine sessions.
"USD/JPY took out resistance at Y83.68, and one now starts to look at levels such as Y84.51 and even the 200-dma is coming into focus at Y85.14. However, there is a lot of ground to cover between here and there," said David Watt, a strategist at RBC Capital Markets.
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