(Reuters) - Sterling hit its lowest in more than a year against the euro and an 11-month low against a basket of currencies on Wednesday, reflecting growing concerns over the UK economy at a time when those about the euro zone are easing. The pound and British government bonds have been one of the main places investors turned to in the search for a safe haven from the euro's troubles and an easing of three years of crisis have led to that play reversing. Traders said month-end demand to buy euros added to pressure on the pound, which failed to benefit from data showing a bigger-than-expected rise in UK mortgage approvals and lending. The euro rose 0.5 percent on the day to hit 86.065 pence, surpassing a reported options barrier at 86.00 pence to hit its highest since early December 2011. More gains were expected, with the next target at 86.20 pence, a peak hit on December 2, 2011. This level also roughly coincides with 1.16 euros per pound, a key level for UK companies looking to hedge foreign exchange exposure. "There is still such power in these moves - in a strengthening euro with sterling one of the main losers - and people are really getting behind them," said Simon Smith, chief economist at FXPro. "The fact that sterling isn't seeing anything in the way of a reversal indicates the lack of appetite to buy it." Sterling has suffered since figures last week revealed the UK economy shrank more than expected in the fourth quarter, raising concerns about a possible credit ratings downgrade and the prospect of more monetary easing. The pound's losses against the euro pushed its trade-weighted index down to 80.5, its weakest since late Feburary 2012. Against the dollar the pound was up 0.1 percent at $1.5771, staying above the $1.5674 struck on Monday, its weakest since late August, and helped by solid gains in the euro against the U.S. currency. However, it remained below chart support at $1.5855, the 200-week moving average. WEAK UK ECONOMY Focus this week will centre on Friday's purchasing managers' survey on manufacturing for January. This could weigh further on the pound if it suggests the UK economy has begun 2013 badly and could be heading for a "triple-dip" recession. The results of the European Central Bank's latest tender for 3-month loans for banks also added to a picture of tightening monetary conditions in the currency bloc which contrasts with the ultra-loose policies being run by the U.S. Federal Reserve and the Bank of England. "I don't think sterling will gain much respite, especially ahead of Friday's PMI data," said Richard Driver, analyst at Caxton FX. "There is no good news for sterling. Other than a short squeeze higher, it's hard to see where any gains are going to come from. It's still a sell on rallies, not a buy on dips." The euro was expected to extend gains after it broke above $1.35 against the dollar, lifted after upbeat German data last week and by signs European banks may have turned a corner.

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