* FX markets digest US financial rescue plan
* Dollar down 0.3 percent to 89.99 yen
* Sterling falls after BoE inflation report
(Adds comments, updates prices)
By Kirsten Donovan and Jamie McGeever
LONDON, Feb 11 (Reuters) - The dollar gave back gains from the previous session on Wednesday as dealers digested the latest U.S. financial rescue plan, while weak equity markets supported the yen and sterling fell due to more gloom over the UK economy.
The consensus was that the U.S. plan -- which could total over $2 trillion -- covered the key areas needed to stem the banking sector bleeding. But it lacked fresh details and failed to meet the high expectations built into financial markets.
The dollar rallied sharply after the plan was announced, as it boosted investors aversion to risk among investors, something that generally benefits the yen, Swiss franc and dollar.
But the dollar slipped back against most major currencies on Wednesday as dealers booked some profits, though the yen retained its broad gains as European equity markets followed Asia and Wall Street lower in early trade.
"An awful lot of bad news was taken on board yesterday... and as equity futures head off lows, that slight rebound in risk appetite (compared to late yesterday) is generally a negative for the dollar," said Adam Cole, global head of FX strategy at RBC Capital Markets.
Sterling was the biggest mover among the majors, extending losses against the dollar and euro after a Bank of England inflation report showed inflation at 0.5 percent in two years, boosting expectations the central bank will ease monetary conditions further.
The Swedish crown also fell sharply after the country's central bank surprised markets with a larger-than--expected interest rate cut of 100 basis points to 1.0 percent.
The main issue in currency markets on Wednesday, however, remained the bank plan unveiled by U.S. Treasury Secretary Timothy Geithner on Tuesday.
By 1045 GMT, the dollar had fallen 0.3 percent to 89.99 yen, and against the euro was down 0.27 percent at $1.2932.
The Japanese currency posted larger gains against sterling and the Australian and New Zealand dollars.
The pound was down 0.88 percent against the dollar at $1.4383 and the euro was up 1.17 percent against the pound at 89.88 pence.
ALL ABOUT RISK
(For more on Geithner's measures, which included a plan to set up a public-private fund that could absorb up to $1 trillion in bad assets from banks' books, see)
Disappointment over the bank plan overshadowed passage of a $838 billion economic stimulus package by the Senate.
However, the Senate and the House of Representatives will now have to haggle over the shape and size of the final plan, leaving much uncertainty over the final size and scope of spending and tax cuts.
Should markets fail to warm to the plan, analysts at Credit Suisse expect the dollar to remain supported and so-called "riskier" currencies to suffer.
"The absence of a specific U.S. commitment to a bad bank structure is likely to put renewed pressure on sterling and, to a lesser extent, the euro relative to the dollar," they said in a note on Wednesday.
In terms of data releases, the global economic picture remained pretty bleak.
Trade data from China released on Wednesday showed a 17.5 percent drop in January exports from a year earlier, and a 43.1 percent decline in imports.
However, UK data showed the number of people claiming jobless benefits rose less than expected, with the closely watched ILO measure of unemployment failing to breach the 2 million mark in the three months to December.