LONDON, Nov 6 (Reuters) - Sterling rose against the dollar on Tuesday despite soft British retail sales figures as investors continued to worry about the health of the U.S. economy.

The dollar hit record lows against the euro and a basket of six major currencies on Tuesday, as fears over credit risks continued to trouble the greenback.

"Markets generally are dominated by some very bearish dollar sentiment still, and cable (sterling/dollar) is getting carried higher by that," said Adam Cole, global head of FX currency strategy at RBC Capital Markets.

"If equity markets continue to hold up the dollar will continue to soften and sterling will trade up on the back of that," he added.

At 0910 GMT the pound was trading at $2.0858, up 0.28 percent on the day and inching up towards last week's 26-year highs above $2.09.

It was up 0.42 percent at 239.07 yen. The euro was up 0.1 percent to 69.61 pence.

A survey by the British Retail Consortium released on Tuesday showed British retail sales growth slowed to its weakest pace in nearly a year in October. Like-for-like sales grew just 1.0 percent on the year, down from 3.0 percent in September.

The figures are likely to boost speculation that interest rates will have to come down sooner rather than later, although a rate cut this week is still seen as an outside bet.

Bank of England governor Mervyn King said in an interview on Tuesday it could be several more months before banks return to normal after the credit crunch stemming from troubles in the U.S. subprime mortgage market.

The Bank of England is expected to hold rates steady at 5.75 percent on Thursday.

Source supplied by: Reuters