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Sterling hits 2-week low vs dollar after US durable goods data

(Recasts with reaction to US data)

LONDON, Aug 26 (Reuters) - Sterling fell to a two-week low against the dollar on Wednesday after robust U.S (Other OTC: UBGXF - news) . data lifted the greenback on a day when relative calm returned to currency markets, lessening the need to buy safe-haven currencies.

Data released on Wednesday showed U.S. non-defence capital goods orders excluding aircraft increase 2.2 percent in July, the biggest rise since June last year and handily beating expectations.

"The dollar has been lifted by the durable goods data, with the previous revisions also helping. But whether that will be enough to bring back expectations of a rate hike by the Fed in September or not is still not clear," said a spot trader.

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Sterling fell 0.8 percent to $1.5562, its lowest since Aug. 12, with investors increasingly unsure about the timing of expected increases in British interest rates amid stock market turmoil.

Money markets have pushed out the timing for a Bank of England (BoE) hike to around the third quarter of next year compared with early 2016 when the central bank published its quarterly inflation report three weeks ago.

Fears of a global slowdown have intensified in recent days since China devalued its currency and data pointed to further signs of weakness. These factors have deepened a sell-off in Chinese stocks and triggered volatility in global stock markets.

Sterling was 0.4 percent higher against the euro at 73.06 pence per euro, having hit a three-month low of 74.21 on Monday when it lost more than 2 percent, its biggest fall since 2009. The euro has been a big winner amid the recent market turmoil as investors unwound trades where they sold the euro to buy higher-yielding or riskier currencies.

The sterling trade-weighted currency basket was lower at 92.7, below a 7-year high of 94.80 hit last week. It (Other OTC: ITGL - news) has been supported by comments this month from BoE Governor Mark Carney that a decision to raise rates could come at the turn of the year.

Recent UK economic data, though, has sent mixed signals. The housing market and rebound in core inflation look strong enough to warrant higher interest rates, analysts say, but retail sales figures were well short of expectations.

"As markets are currently pricing the BoE to raise rates even later, we see little risk to our call for a stronger sterling and continue to recommend an overweight position, especially against the Australian dollar," strategists at UBS (NYSEArca: FBGX - news) 's chief investment office wrote in a note. (Reporting by Anirban Nag; Editing by Mark Heinrich)