Sterling rose against a broadly weaker dollar on Wednesday, on expectations that the Federal Reserve's liquidity boosting measures will not fix economic problems in the U.S. and with focus turning to the UK budget.

The first budget from UK finance minister Alistair Darling could see him nudge down growth forecasts for this year from a 2.0 to 2.5 percent range as Britain's economy faces its most challenging test in more than a decade.

But with no real surprises expected from the budget, sterling's gains reflected broad profit taking in the dollar, which had rallied on Tuesday after a coordinated liquidity injection from the Federal Reserve and other central banks to help loosen gummed-up money markets.

Longer-term though, analysts said the pound's outlook was shaky due to continued nervousness over the economy's prognosis and expectations for further UK monetary easing from 5.25 percent.

"Sterling is getting a bit overdone up here, around the $2.02 level. We might be seeing slightly softer data and I think the next move will be back down into a range with a $2.0150 high," Westpac currency strategist Geoff Kendrick said.

By 0843 GMT, the pound was up 0.2 percent on the day at $2.0102 while the euro was flat at 76.43 pence.

On the data front ahead of the budget, UK trade numbers are due out at 0930 GMT with a deficit of 7.5 billion pounds expected for January, broadly in line with the previous month.

"The risks are more on the downside for sterling as we are at record levels in the trade deficit," RBS currency strategist Adrian Schmidt said.

Sourced by Reuters.