Sterling trims loss as BoE puts QE on hold

* Sterling down 0.2 pct at $1.5856 GBP=D4

* BoE pauses QE, keeps rates unchanged as expected

* BoE says can make further asset buys if outlook warrants

* Euro hurt on peripheral euro zone fiscal woes

LONDON, Feb 4 (Reuters) - Sterling trimmed losses after hitting a 3-1/2 month low against the dollar on Thursday as the Bank of England put quantitative easing on hold as expected.

The BoE announced no increase to its unprecedented 200 billion pound asset-buying programme, pausing the scheme after 11 months in a move that could signal a return to more normal policy.

It also left UK interest rates at a record low of 0.5 percent, as expected. [ID:nLAC005629]

The pound gained about 40 ticks to around $1.5863 after the decision. By 1235 GMT, the pound was at $1.5856 GBP=D4, down 0.2 percent on the day.

The BoE said in a statement it would continue to monitor the programme and could make further purchases should the outlook warrant them.

But it also said, "This stock of past purchases, together with the low level of Bank rate, would continue to impart a substantial monetary stimulus to the economy for some time to come."

George Buckley, UK economist at Deutsche Bank, said: "The statement sounds reasonably dovish to the extent that they are saying the recovery is going to continue at a slow pace.

"It also looks like as long as the recovery continues, even if it is quite a shallow recovery, they probably won't do any more QE. That is the message this is sending out."

Earlier, the pound fell against a broadly firmer dollar on expectations for a robust U.S. jobs report on Friday.

Sterling's decline gained momentum as the pound fell below $1.5850 and then $1.5830 support, traders said, pushing it to $1.5806, its lowest since October last year.

The euro trimmed gains to trade 0.2 percent lower at 87.22 pence from around 87.46 pence EURGBP=D4 before the BoE's decision.

"The market may have been anticipating some degree of further easing, especially in light of disappointing growth figures," said Geoffrey Yu, currency strategist at UBS.

The euro was also under pressure as investors turned on other highly-indebted euro zone countries after Greece won European Commission endorsement for its fiscal reforms on Wednesday.

Portuguese bonds bore the brunt of selling pressure, with spreads widening to just off a euro-era high while the cost of insuring Portuguese sovereign debt soared to a record high.

"The EC endorsement of Greece's fiscal programme did not do much to ease euro zone sovereign risk concerns," UBS's Yu said.

The European Central Bank also left interest rates steady on Thursday as expected, with focus turning to a news conference by ECB President Jean-Claude Trichet.

(Reporting by Tamawa Desai, editing by Nigel Stephenson)