Britain's FTSE closes at record level, steadies against stronger sterling

* FTSE 100 up 0.1 pct at close

* RBS (LSE: RBS.L - news) rises as Natixis (LSE: 0IHK.L - news) upgrades its view

* Tullow Oil (LSE: TLW.L - news) drops on share sale

* Berkeley rises on rosier forecast despite London pinch (Recasts, adds detail and updates prices at close)

By Helen Reid and Kit Rees

LONDON, March 17 (Reuters) - British shares edged higher on Friday, closing at a record level but with a stronger sterling capping gains.

The FTSE 100 index ended 0.1 percent higher and posted a small gain for the week.

A rising pound, however, added pressure on blue chips after jumping on Thursday following an unexpected vote for a rise in interest rates from outgoing Bank of England policymaker Kristin Forbes.

"Mixed appetite in commodities added to the stronger pound could keep the appetite limited," said Ipek Ozkardeskaya, analyst at LCG Markets.

Royal Bank of Scotland was among top blue-chip gainers, up 1.4 percent after Natixis upgraded its view on the bank, saying the investment thesis was reaching a turning point.

"The time is near when the long-standing strengths of the core bank will outweigh the material drag of legacy items," the bank said.

The bigger moves in British stocks, however, were in mid-caps and small-caps.

Tullow Oil dropped almost 15 percent, after it announced a 607 million pound share sale to cut its $4.8 billion debt burden.

The rights issue was offered at a 45.2 percent discount to yesterday's closing price.

"We believe today's announcement provides sufficient liquidity to get through 2018 but Tullow may still need to refinance its $3.3 billion reserve-base loan and/or farm-down Kenya to avoid the risk of value leakage through project deferrals in 2019 and beyond," said UBS (LSE: 0QNR.L - news) analysts.

London-focused housebuilder Berkeley rose to its highest since the Brexit vote, up 6.1 percent after it forecast full-year profits at the top end of market estimates despite demand falling in the capital.

"Today's statement is a clear signal of the disconnect between the new build and second hand market," said Jefferies analysts.

"While London-based estate agents are feeling the cold, Berkeley Group is warming itself in the spring sunshine."

Valve-maker Weir Group (Other OTC: WEIGY - news) was up 3.3 percent after Barclays (LSE: BARC.L - news) upgraded the stock to 'overweight', forecasting double-digit order growth over 2017-18.

The small-cap index outperformed other major European share indexes, up 0.4 percent as biotech company Circassia (Stuttgart: 23863607.SG - news) soared.

Circassia gained as much as 23 percent after it signed a deal with AstraZeneca (NYSE: AZN - news) to develop and commercialise drugs Tudorza and Duaklir, licenced by Spain's Almirall, in the U.S. It ended the session up 5.4 percent.

The firm lost more than half its market value in June 2016 when its experimental cat allergy treatment failed a late-stage trial. (Editing by Jeremy Gaunt)