LONDON: Sterling edged higher against the dollar on Thursday, building on its rebound from a more than 2-1/2 year low, although gains looked limited by persistent concerns about the British economy. Strategists said the pound's recovery from Tuesday's trough of $1.4832, its lowest level since June 2010, was unsurprising given the extent of its 8 percent slide against the dollar so far this year. Investors who had sold sterling at higher levels were using the opportunity to take profit on those positions, particularly given a lack of UK data for the rest of this week. "It's been such a long time since we have been at these kind of levels there's a natural inclination to question how much lower sterling can go," said Neil Mellor, FX strategist at Bank of New York Mellon. "But there are so many problems lined up - political, credit ratings, the economy. Everything points south for sterling at the moment." The pound rose 0.1 percent against the dollar to $1.4932, with traders citing demand from long-term investors. Resistance was expected around $1.50, and beyond that at the March 5 high of $1.52. The euro was close to flat on the day at 86.78 pence, off a two-week high of 87.93 pence hit on Tuesday. Weak manufacturing output figures on Tuesday were the latest in a string of sluggish data that has raised concerns the British economy could be heading for a third recession. A credit rating downgrade last month, faltering support for government austerity policies and speculation the Bank of England (BoE) may opt for more monetary easing to stimulate growth are other factors clouding the outlook for the pound. Analysts said many market players would also be wary of taking large positions before finance minister George Osborne presents the UK budget on March 20. Speculation is mounting that Osborne will announce a review of the BoE's remit and give it more leeway on inflation targeting, allowing scope for a further easing of monetary policy. "Sterling's better tone in the last couple of days seems essentially position related, and it is hard to see any further test of the recent range extremes this side of the Budget unless it comes from an independent euro or dollar move," Lloyds analysts said in a note. They expected the pound to hold between $1.4825 to $1.50, and the euro to trade between 86.30 and 87.90 pence.

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