Sterling gains but risks losses on more QE prospects

* Sterling advances on better risk appetite

* UK clearer buying pushes Cable higher, before selling by ACBs

* MPC voted unanimously for 75 bln QE, considered more (Updates, adds details, quote)

By Anirban Nag

LONDON, Oct 18 (Reuters) - Sterling hit a near one-month high against the dollar on Wednesday, supported by better risk sentiment, but ran into selling by Asian central banks and other investors at higher levels.

Traders said sterling was vulnerable to a selloff in the near term, especially after Bank of England policy minutes hinted more asset purchases may be needed to help Britain's ailing economy.

Bank of England policymakers voted unanimously to resume quantitative easing (QE) this month, and considered injecting even more than the 75 billion pounds agreed, minutes to the BoE's October meeting showed.

Sterling fell slightly after the minutes but held above the $1.5700 overnight low and recovered to hit a session high of $1.5848 on buying by a UK clearer.

The pound last traded at $1.5808, up 0.7 percent on the day, with near-term resistance at $1.5853 -- the one-month high struck on Oct. 14 -- with stops cited above $1.5860. Traders said sterling's rise spurred selling by Asian central banks.

"The spike higher in Cable was a good opportunity to sell," said a spot trader. "We maintain our bearish view on it given prospects of more QE, although a move above $1.5850 could see a short squeeze up to the $1.5930/40 area."

In a speech on Tuesday, BoE Governor Mervyn King defended the decision to launch another round of quantitative easing, citing a slowing world economy, especially in the euro zone, as threatening the recovery of the UK economy.

"The minutes reinforce the view that the BoE is really concerned about the international environment, in particular the situation in the euro zone, and they stand ready to do more QE rather than less," said Kiran Kowshik, currency strategist at BNP Paribas.

"We therefore remain bearish on sterling, but with the markets trading on headlines ahead of Sunday's EU summit, it's better to have a neutral view on sterling against the dollar for now," he added, preferring a short sterling position against the Canadian dollar .

Most market players had anticipated a unanimous vote for more asset purchases with a slight risk that the BoE's chief economist Spencer Dale may have voted for less than the agreed 75 billion pounds or even none at all.

STOCKS HELP STERLING

Gains in European stocks and optimism that major steps would be taken by euro zone policymakers at the weekend towards solving the debt crisis shored up sentiment towards the pound but market players said further upside would be limited.

"It's tough to be anything other than a seller of sterling unless the risk environment improves dramatically," said Jeremy Stretch, currency strategist at CIBC. "The prevailing wind is blowing strongly in favour of more monetary stimulus," he said.

Analysts said that while there are signs that progress on tackling the euro zone debt crisis will be made this weekend, a comprehensive and a durable solution was unlikely and the UK would remain vulnerable to financial tensions in Europe.

The euro gave up gains against the pound on talk that the euro zone's bailout fund would not be expanded to 2 trillion euros as had been reported by Britain's Guardian newspaper. .

The report was denied by two senior euro zone sources.

The common currency was down 0.3 percent at 87.22 pence, hovering just near its 200-day moving average which comes in at 87.27 on Wednesday. (Editing by Susan Fenton)