Sterling falls versus dollar after U.S. yields surge

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

By Joice Alves

LONDON, Sept 28 (Reuters) - Sterling fell versus a strengthening dollar on Tuesday after U.S. treasury yields jumped to the highest in almost three months following hawkish U.S. Federal Reserve remarks.

U.S. yields have surged since last week when the Federal Reserve announced it may start tapering stimulus as soon as November and flagged interest rate increases may follow sooner than expected.

More remarks from the Fed Chair Jerome Powell on Monday, prepared for delivery to the Senate Banking Committee later in the day, pushed the UK 10-year gilt yield to its highest since the pandemic started, while the U.S. 30-year treasury yield surged to highest level since July in early London trading.

Sterling fell 0.3% to $1.3671 at 0830 GMT. Versus the euro it edged 0.1% lower at 85.48 pence.

Powell said that the central bank would move against unchecked inflation if needed as higher prices and hiring difficulties seen as the U.S. economy reopens could prove "more enduring than anticipated".

"It is all about U.S. Treasuries today as yields climb higher in early trading, placing the whole G10 under pressure," said Simon Harvey, senior FX market analyst at Monex Europe.

The U.S. dollar against a basket of currencies jumped to its highest since Aug. 20.

"Amid this backdrop, hawkish commentary from Governor Bailey has been a blunt instrument," Harvey added.

Sterling jumped last week following the Bank of England's hawkish tone on interest rates and its pandemic-era government bond-buying scheme. Governor Andrew Bailey reiterated on Monday that he and other members of the Monetary Policy Committee saw a growing case to raise interest rates.

But analysts said those gains may have been overdone given the other challenges facing the British economy.

Petrol station pumps ran dry in British cities and vendors rationed sales as a post-Brexit shortage of truckers triggered panic buying and raised fears that hospitals would be left without doctors and nurses.

Investors will be also watching a two-day conference by the European Central Bank kicking off later in the day, with Governor Christine Lagarde making opening remarks. (Reporting by Joice Alves Editing by Robert Birsel)