Sterling firms after BoE restrained in raising QE

* Sterling hits 2-wk high vs dollar on muted BoE QE rise * BoE holds rates at 0.5 pct, increases QE by 25 bln pounds * Rise in asset-buying plan smaller than some expectations

By Naomi Tajitsu

LONDON, Nov 5 (Reuters) - Sterling jumped to a two-week high against the dollar on Thursday after the Bank of England expanded its quantitative easing programme by 25 billion pounds, confounding some analysts' expectations of a bigger increase.

The announcement helped the pound recover losses made in early trade, when traders had been divided on the size of any increase in the asset-buying plan, if the bank extended it at all. The BoE left interest rates unchanged at a record low of 0.5 percent, as expected. [ID:nL5152809]

A Reuters poll had shown that two-thirds of analysts had predicted the BoE would expand its asset-buying scheme, with the consensus being an increase of 25 billion pounds. Some in the market had forecast a 50 billion pound increase.

Analysts said the pound rallied as market participants were relieved the BoE did not take more drastic action on quantitative easing, and on the view that it may hold off from implementing aggressive stimulus through the end of the year.

"Some in the market expected 50 billion pounds, and so 25 billion was seen as less aggressive," said Chris Turner, currency strategist at ING in London.

"The market has more transparency on UK rate policy, just 25 billion more in QE, nothing more drastic about that."