(Updates with Bank of England decision; refreshes prices at 1233

GMT)

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Sterling rallies after BoE cuts rates, expects faster

inflation

and growth

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Euro rises despite German government collapse, political

crisis

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Yen hits three-month low, Japan signals readiness to act

By Amanda Cooper

LONDON, Nov 7 (Reuters) - The dollar held near

four-month highs on Thursday, having scored its biggest one-day

rally in two years following Donald Trump's win in the U.S.

presidential election, and as investors prepped for the Federal

Reserve's upcoming rate decision.

Sterling rallied after the Bank of England cut interest rates

but said it expected UK inflation and growth to pick up more

quickly than it had previously anticipated.

Front and centre, however, was the dollar, which rose by as

much as 2% at one point against a basket of currencies on

Wednesday, as investors piled into U.S. assets that they

expect would benefit from Trump's proposed policies on tariffs

and taxes.

Trump's win is unlikely to make any immediate difference to

the Fed, which is expected to cut interest rates by 25 basis

points later in the day. So investors will start to look to who

Trump's key appointees might be, as well as whether or not his

Republican party wins both chambers of Congress in a "Red

sweep", which could dictate how easily he may enact some of his

proposals.

"If there is, then we will probably, in the market

collectively, conclude he will get more of his fiscal agenda

through. And that could be dollar-supportive," Rabobank currency

strategist Jane Foley said.

"There is going to be a lot of back and forth to try and

work out exactly what is the inflation impact of this going to

be, and therefore, how is the Fed going to react? But, generally

speaking, I think all of that is certainly dollar-positive

through 2025," she said.

More immediately, traders will want the Fed to indicate what to

expect in December and beyond, particularly after last week's

October jobs report, which was well below expectations, due in

large part to disruption from recent hurricanes and labour

strikes.

Trump's victory has also fuelled speculation the Fed might

reduce rates at a slower and shallower pace, as his policies on

restricting illegal immigration and enacting new tariffs could

boost inflation.

Markets now see about a 67% chance the Fed will also cut

rates next month, down from 77% on Tuesday, according to the CME

Group's Fed Watch Tool.

The dollar index, which measures the U.S. currency

against six others, was down 0.3% at 104.84 after surging to its

highest since July 3 on Wednesday, when it logged its biggest

single-day gain since September 2022, up 1.5%.

EURO SHRUGS OFF GERMAN GOVERNMENT COLLAPSE

Sterling neared session highs after the BoE cut rates

as forecast but suggested future rate cuts may only be gradual,

given the expected rise in growth and inflation stemming from

finance minister Rachel Reeves' budget last week.

The pound was last up 0.4% on the day at $1.29365.

The euro rose 0.3% to $1.0764, having tumbled as

low as $1.06828 for the first time since July 27 on Wednesday.

The single European currency shrugged off political crisis in

Germany, where the already awkward coalition led by Chancellor

Olaf Scholz collapsed late on Wednesday.

Sweden's Riksbank cut rates by half a point, as expected,

leaving the crown up 0.2% against the euro at 11.618

, while Norges Bank left Norwegian rates unchanged,

pushing the crown up 1% against the euro.

The yen hit a three-month low against the dollar of 154.715.

Japan's top currency diplomat Atsushi Mimura flagged officials'

readiness to act, marking the government's strongest warning to

speculators in recent months.

The Japanese currency was last up 0.45% at 153.92.

The yuan rose 0.5% after China's exports blew past forecasts,

having earlier touched its lowest level in nearly three months.

Offshore yuan traded at 7.1677 yuan per dollar.

Bitcoin fell 1.32% to $74,663, having hit a record

high on Wednesday of $76,499.99. Ether rallied 4.5% to

$2,811, around its highest since early August.