Sterling pares gains vs dollar after U.S. data

* Sterling pares gains vs dollar after weak U.S. jobs data

* Still close to 2-week high after BoE upped QE funds * Focus moves to BoE Inflation Report on Wednesday

LONDON, Nov 6 (Reuters) - Sterling pared gains against the dollar on Friday as a weaker-than-expected U.S. jobs report left investors more averse to risk and offset the boost to the UK currency from the previous day's Bank of England decision.

However, the pound stayed not far from a two-week high against the dollar hit after the central bank on Thursday increased its quantitative easing programme by 25 billion sterling, less than the 50 billion rise many had forecast.

The top-up to QE broadly supported sterling, particularly as many in the market believe this will be the last.

But the pound pared gains after closely-watched U.S. data showed the economy lost 190,000 jobs in October, slightly more than forecast, while the jobless rate rose to a 26 1/2 year high of 10.2 percent from 9.8 percent.

The data, particularly the rise in the headline unemployment rate above 10 percent, dented investors' appetite for risk, weighing on perceived higher risky currencies, such as sterling.

"People went into the U.S. jobs numbers in a positive frame of mind and they leapt on the unemployment rate, given concerns about the psychological impact of this number on consumer confidence," said Gavin Friend, currency strategist at nabCapital.

"But as long as sterling can hold above $1.6470 against the dollar then I think it will go into next week moving sideways before Wednesday's BoE Inflation Report. If people really believe the BoE is now winding down QE then they might start to question why sterling is lagging other currencies," he said.

By 1512 GMT, sterling edged down 0.1 percent against the dollar to $1.6577, though it was still not far from $1.6637 hit on Thursday, its highest since Oct. 23.

The pound dipped against the euro with the single currency up 0.2 percent at 89.85 pence.

Sterling is poised to end the week little changed against the euro and up around 1 percent against the dollar.

BOE INFLATION REPORT AHEAD

With the BoE meeting over, analysts said the market would focus on the bank's quarterly inflation report next week, which should shed more light on the medium-term outlook for prices, the key driver of the BoE's monetary policy. [ID:nL6101431]

"If the projections show inflation around target on a two-year horizon then this should cement the idea that QE has ended," nabCapital's Friend said.

UK producer prices data on Friday indicated pipeline inflationary pressures were picking up in the UK, with annual input price inflation for UK manufacturers turning positive in October for the first time since February [ID:nL6706911]

Under its QE programme, the BoE has since March been buying assets to inject liquidity into the economy. This contributed to recent sterling weakness which saw the pound touch a five-month low against the dollar in October.

But the pound is still well above its low for the year -- hit in January -- at around $1.35.

"Clearly people are still trying to digest the news yesterday and to assess the implications for sterling of the end of QE," said David Woo, head of currency research at Barclays (LSE: BARC.L - news) Capital.

"There is the question that if the Bank of England is buying fewer gilts, will that mean more foreign investors will be buying them?" he added.

However, the overall view that the BoE will maintain economic stimulus and keep interest rates low perhaps for longer than other central banks is seen limiting further gains.

(Reporting by Jessica Mortimer, editing by Nigel Stephenson)