LONDON, Nov 2 — The pound edged higher today ahead of an interest rate decision from the Bank of England, while the dollar fell after the US Federal Reserve held borrowing costs steady yesterday.

Sterling was last up 0.29 per cent at US$1.2185 (RM5.79). The currency fell to a seven-month low of US$1.2039 in early October and has since traded in a range just above that level.

Investors and economists expect the Bank of England to keep interest rates at a 15-year high on Thursday and to signal that it plans to keep them at the current 5.25 per cent level for an extended period.

Signs of a slowdown in much of the British economy have become clearer since the Bank held rates at its last meeting, although inflation remains stronger than in many other major economies.

The Fed yesterday held rates in the 5.25 per cent to 5.5 per cent range, their highest level in 22 years. Chair Jerome Powell said the central bank may need to raise rates again but was comfortable waiting to see whether the latest run of strong economic data continues.

Traders interpreted the Fed decision and Powell’s comments as relatively dovish on inflation, leading US bond yields to fall and bring the dollar down with them.

The dollar index, which tracks the greenback against its major peers, was last down 0.28 per cent at 106.17.

It has traded sideways since hitting an almost one-year high of 107.34 in early October on the back of a sharp rise in US bond yields driven by strong economic growth.

Joe Tuckey, head of FX analysis at broker Argentex, said the muted trading in currency markets in recent weeks was due to the fact that central banks are in "wait-and-see mode” on rates and inflation.

"We’ve reached the point now with these central bank meetings when we’re in a bit of a holding pattern, so it makes sense to see some reduced volatility and consolidation,” he said.

"We come to the Bank of England today and it’s incredibly unlikely that they’ll do anything and we’re now in wait-and-see mode.”

The euro was up 0.28 per cent against the pound at 87.23 pence today. It has also been range-bound over the last month but is down 1.5 per cent against sterling this year.

The pound was one of the more subdued currencies in global markets today. The euro rose 0.5 per cent against the dollar as investors sold the same-haven dollar, encouraged by the fall in global borrowing costs after the Fed meeting and smaller-than-expected government borrowing from the US Treasury. — Reuters