LONDON, Aug 23 (Reuters) - Sterling strengthened broadly on Thursday, moving back above $2, as calmer financial markets boosted investors' appetite for risk, lifting high-yielding currencies and equity prices.

Worries over a credit crisis have showed signs of easing after central banks acted to shore up confidence and ensure liquidity.

"Sterling has benefited from a general return to risk appetite," said Paul Robson, currency strategist at Royal Bank of Scotland. "Other high yielders and commodity currencies like the Canadian dollar are also up showing there is more confidence in the market and a greater focus on yield."

At 1350 GMT, the pound was up 0.6 percent on the day versus the dollar at $2.0047 <GBP=>, and was up 1.5 percent against the yen at 233.48 yen <GBPJPY=R>.


The euro was off 0.5 percent at 67.63 pence <EURGBP=>.

Sterling was up half a percent on a trade weighted basis at 104.3, its highest level since August 14.

Markets were cheered by news on Wednesday that the Bank of Japan had refrained from raising interest rates while Bank of America Corp said it would invest $2 billion in the largest U.S. mortgage company Countrywide Financial Corp.

Investors' nerves were also soothed after top 5 U.S. banks said they had used the Federal Reserve's discount window to borrow over $2 billion of funds.

In this environment, dealers are more liable to put on carry trades, where low-yielding units like the yen are sold for relatively high-yielding ones like sterling.

Data on Wednesday showed business investment in Britain picked up only modestly in the second quarter after falling in the first quarter suggesting a key engine of economic growth may be cooling. Click on [nL2320075].

Investors are looking to UK economic data for clues on the outlook for UK interest rates.

Markets had been pricing in a rate hike from the current 5.75 percent in September but analysts have pared back expectations since recent turmoil in financial markets.

Source supplied by: Reuters