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Sterling set for second week of gains versus dollar

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A bank employee counts pound notes at Kasikornbank in Bangkok
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By Ritvik Carvalho

LONDON (Reuters) -Sterling was on track for a second week of gains against the dollar on Friday, consolidating above $1.40 as the U.S. currency took a breather from a recent rally.

The pound is up 1.8% against the dollar since the start of May and is the second best performing G10 currency against the dollar year-to-date, aided by a more hawkish Bank of England, which has begun tapering asset purchases, and by Britain's vaccination drive that has enabled a gradual reopening of the economy.

Britain will adapt its vaccine rollout to protect people more quickly in areas where a coronavirus variant first detected in India has emerged, the vaccine minister said on Friday.

The UK has delivered one of the fastest inoculation campaigns in the world, giving a first shot to almost 70% of the adult population and a second to 36%, helping to reduce infection rates and deaths.

By 1556 GMT on Friday, sterling was up 0.3% against the dollar at $1.4095, off a nearly three-month high of $1.4167 hit earlier this week.

Against the euro, sterling was 0.2% lower at 86.13 pence.

"GBP is largely holding onto recent gains and progress on the Indian variant of the virus is yet to have any impact," said ING in a note to clients. "Yet this needs to be watched."

"EUR/GBP did reject levels down at 0.8560 earlier this week quite strongly and we tend to favour more consolidation for the time being."

Analysts also say a combination of a stronger UK economic rebound than expected and the belief that any Scottish independence vote is a long way off makes the pound relatively attractive.

Britain's economy grew by a stronger-than-expected 2.1% in March from February, gathering speed for what is expected to be a sharp bounce-back this year after its deep coronavirus slump of 2020.

(Reporting by Ritvik Carvalho. Editing by Jane Merriman and Nick Macfie)