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* FTSE 100 down 0.5 pct
* Sterling hits 1-yr high
* Miners, dollar-earners biggest fallers
* Dunelm update brings cheer
LONDON, Sept 13 (Reuters) - Britain's top share index dropped on Wednesday as sterling held at a one-year high, weighing on the FTSE's foreign-earning firms including miners, pharma stocks and big consumer staples.
The UK's blue chip FTSE 100 index was down 0.5 percent at 7,361.94 points by 0911 GMT, extending the previous session's losses and underperforming the broader European STOXX 600 index, which dipped 0.3 percent.
Sterling surged to a one-year high in the previous session, spurred by a surprise jump in inflation to 2.9 percent in August, which put the spotlight on the Bank of England's policy decision due on Thursday.
The currency continued its ascent in early trading on Wednesday before paring gains to trade flat after the release of weaker-than-expected UK wage data.
"I'm not sure whether the (BOE) message on Thursday will be quite as hawkish as some might expect, because to hike rates now while we've technically got more people working, but for less, while prices are rising, is not really the ideal set-up for hiking," said Mike van Dulken, head of research at Accendo Markets.
"Hawkish rhetoric would benefit the financials, but a stronger pound is going to hurt the rest of the international exposure," van Dulken added.
The pound's slump in the aftermath of Britain's vote to leave the European Union in June 2016 prompted a rally in the FTSE 100's predominantly dollar-earning constituents, which received an accounting boost when converting their revenues back to pounds.
Shares in pharma firm Shire, which sourced 67 percent of its revenue from North America in 2016, according to Thomson Reuters data, declined 1.4 percent, also hit by a target price cut from JP Morgan.
Falls in Diageo and British American Tobacco also weighed.
Financials and mining stocks collectively took the most points off the FTSE 100, with miners Anglo American, BHP Billiton, and Glencore the biggest fallers, dropping between 1.5 percent to 1.8 percent as the price of copper came under renewed pressure.
Budget airline operator easyJet was among the few stocks making any headway, its shares ticking 1.3 percent higher after launching a platform which allows customers to book flights with other airlines on its website.
Dunelm's shares led the mid caps, soaring 6.4 percent after a well-received full year update.
Analysts said the results from the home furnishings specialist were broadly in line with expectations, assuaging concerns over UK consumer spending which have plagued domestic-facing stocks since sterling's plunge after the Brexit vote.
(Reporting by Kit Rees; Editing by Gareth Jones)