Stg pares losses vs dlr, gilts slide, after MPC minutes

LONDON, May 21 (Reuters) - Sterling pared losses versus the dollar and euro on Wednesday and UK interest rate and gilt futures extended losses after the minutes after the Bank of England's MPC minutes showed an 8-1 vote in favour of keeping rates steady at 5 percent as forecast.

The fact that only one member of the MPC voted for a cut helped firm the view that the Bank of England may not cut rates in the near future.

"The disappointment for doves is that no one else made the case for another rate cut," said Daragh Maher, senior currency strategist at Calyon.

By 0832 GMT the pound was at $1.9670, from $1.9650 just before the minutes <GBP=>. The euro was at 79.88 pence from 79.95 pence <EURGBP=>.

UK interest rate and gilt futures extended losses after the minutes, pushing implied rates and government bond yields up further.

Two-year gilt yields rose a further basis point to trade up 6 bps on the day at 4.85 percent <GB2YT=RR> and 10-year yields also rose another basis point to 4.85 percent <GB10YT=RR>.

The June gilt future extended losses, trading as low as 107.00 FLGc1, down as much as half a point on the day, and short sterling contracts fell as much as 8 ticks across the 2008 strip <0#FSS:>.

SONIA contracts were pricing in roughly a one-in-ten chance of a further rate cut by the end of the year, Reuters calculations showed.

Analysts polled by Reuters had forecast that 8 members of the Monetary Policy Committee had voted to keep rates on hold with only arch-dove David Blanchflower voting to cut rates by 25 basis points. (Reporting by Simon Falush)