Sterling lost nearly a pfennig and a half against the deutschmark yesterday as it cautiously awaited the outcome of the two-day meeting of the Bank of England's monetary policy committee which ends today.

Most analysts expect official British rates to remain on hold although they say the committee faces a tough decision and it could be finely balanced.

The pound closed at 0.8989 sterling against 0.8972 on Tuesday, remaining firmly entrenched in its recent 89p-90p range.

Recent British economic data has been slightly stronger than expected, containing little evidence that the economy was slowing down, while third-quarter GDP was well above trend.

But the Asian economic crisis and huge volatility in world stock markets may militate against a monetary policy tightening.

The uncertainty weighed on sterling, which slipped to DM2.8915/25 late yesterday from an earlier peak of DM2.9068.