LONDON - Sterling held above $1.39 against the dollar on Thursday after British finance minister Rishi Sunak rolled out 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. 

ING currency strategists said in a note to clients that the "generous budget" was seen "to strike the right balance and support the spring recovery".

The support, which included a five-month extension of Britain's jobs rescue plan, will enable the UK economy to return to its pre-pandemic size in mid-2022, six months earlier than previously forecast, Sunak said. 

Sterling is finding support from the budget and progress on vaccinations, said Neil Jones, head of FX sales at Mizuho Bank, which "add weight to the view the UK will stand at the forefront of the global COVID recovery".

"My sense is the budget measures bode well in the eyes of overseas investors".

Sterling edged 0.1% lower against the dollar to $1.3937 at 1105 GMT . Versus the euro, it gained 0.1% to 86.40 pence. 

The pound, which last week hit its highest versus the dollar since 2018, has gained 2% against the U.S. currency and more than 3% against the euro this year.

Relief over a Brexit trade deal signed in December with the European Union and a Bank of England pushing back market expectations of negative interest rates also supported the pound.

(Reporting by Joice Alves; editing by John Stonestreet) ((Joice.Alves@thomsonreuters.com; Reuters Messaging: joice.alves.reuters.com@reuters.net))