Britain's central bank said inflation was likely to fall below 1 percent and monetary tightening would happen at a slower pace. Governor Mark Carney said it was appropriate that markets expected somewhat easier monetary conditions.
Sterling hit a low of $1.5782, a level last seen in September 2013, and has lost 6 percent against the dollar over three months.
A basket of major currencies traded against the dollar was up 0.4 percent late Wednesday.
The yen pulled back from a seven-year low against the dollar, after comments from a Japanese government official cooled speculation that Prime Minister Shinzo Abe will call a December election.
The dollar, which had popped above 116 yen earlier in Asia, was down 0.1 percent in New York at 115.70. It had risen to 116.11 yen on Tuesday.
The yen has come under pressure on growing expectations Abe will postpone a sales tax increase and call an election next month. If he wins, a second round of reflationary policies may follow.
The Swiss franc edged up to 26-month high, bringing it very near the Swiss National Bank's three-year-old cap of 1.20 francs per euro, which might trigger actions by the central bank to weaken the currency. The euro was flat in New York after trading at 1.2017 francs, its weakest against its Swiss counterpart since September 2012.
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