Sterling falls after Fitch flags UK rating risks

* Sterling falls on Fitch comments about UK rating * Pound trims losses, data shows UK retail, housing improves * UK trade data at 0930 GMT, inflation report on Wednesday

By Naomi Tajitsu

LONDON, Nov 10 (Reuters) - Sterling fell on Tuesday after a ratings agency said highly-indebted Britain was the major economy most at risk of losing its AAA rating.

Sterling fell as much as a cent and a half after Fitch told Reuters Television that Britain would find it tougher to sustain its fiscal deficit without impacting interest rates or the currency than the United States.

A further fiscal stimulus package could put the coveted rating at risk [ID:nT286946].

As the UK government borrows heavily to pull its economy out of recession, its weak fiscal position is an issue that has long plagued sterling, and traders often sell off the currency on any suggestion Britain may lose its top-notch rating.

However, the pound pared some losses in London trade after better-than-expected UK house price figures and strong domestic retail sales data released overnight suggested the economy may be emerging from recession. [ID:nLAG005910] [ID:nLAG005909]

By 0838 GMT, sterling traded 0.6 percent lower on the day at $1.6647, pulling away from a three-month high of $1.6844 hit on Monday, its strongest since early August.