Sterling hits 5-mth high vs dlr on UK recovery hopes

* Sterling hits 5-mth high vs dollar of $1.5538

* Optimism on UK economy, relief at BoE minutes support stg

* Gains capped as UK shares fall 0.6 pct; stg dips vs euro

LONDON, May 20 (Reuters) - Sterling hit a five-month high against the dollar on Wednesday, boosted by ongoing optimism that the UK economy is over the worst of the recession.

The UK currency was helped higher by broad losses in the U.S. dollar and as investors took heart from the fact that the minutes to this month's Bank of England's policy meeting contained no unpleasant surprises.

The underperformance of UK stocks capped sterling's gains versus the dollar and pushed it lower against the euro, however, with the FTSE 100 index .FTSE down 0.6 percent as financial stocks retreated after recent hefty gains.

The BoE report revealed a unanimous vote to extend its quantitative easing programme by 50 billion pounds and a debate on whether to expand it by 75 billion [ID:nBOE001866]. This caused a very brief dip in the pound which was rapidly reversed.

"The key for sterling is that we have seen some signs of improvement in the UK banking sector and we are beginning to see signs of economic data improving," Bank of Scotland Treasury currency strategist Naeem Wahid said.