By Joice Alves

LONDON (Reuters) – Sterling held above $1.39 against the dollar on Thursday and gained versus the euro after British finance minister Rishi Sunak unveiled an expansive annual budget designed to prop up the economy.

Sterling is the best-performing G10 currency this year, with investors expecting Britain’s speedy vaccination programme will help the economy to recover from its worst annual contraction in 300 years.

As the locked-down country prepares to re-open, Sunak delivered what he hopes will be a last big spending splurge to get the economy through the COVID-19 crisis.

The UK economy will return to its pre-pandemic size in mid-2022, six months earlier than previously forecast, Sunak said.

ING analysts said in a note to clients that the “generous budget” was well received and it was seen “to strike the right balance and support the spring recovery.”

Sterling edged 0.2% lower against the dollar to $1.3921 in early London trading,. Versus the euro, it gained 0.1% to 86.41 pence.

“Sterling is performing well …My sense is the budget measures bode well in the eyes of overseas investors,” said Neil Jones, Head of FX Sales at Mizuho Bank.

He said the measures and progress on vaccinations “add weight to the view the UK will stand at the forefront of the global COVID recovery”.

(Reporting by Joice Alves; editing by John Stonestreet)