Sterling edges up; UK service sector activity improves 

LONDON, Aug 5 (Reuters) - The pound edged up on Wednesday, with most gains coming against the yen, which steadied after several rounds of intervention.

Investors took some heart from U.S. President Donald Trump saying his administration had held "very good discussions" with Iran during all-day negotiations on Tuesday, which kept the oil price around $80 a barrel. 

Sterling was a touch stronger against both the dollar and the euro, trading at $1.347 and 0.856 pence, respectively, while rising 0.2% against the Japanese currency to 212.33 yen. 

Caxton currency strategist David Stritch said the pound "remains a little adrift of motivation", given its lack of volatility. 

The yen is not far off its strongest against the dollar in three months, following historic intervention by Japanese and U.S. officials late last week. Against the pound, it is near its strongest in five months.

UK markets were unruffled by a report from The Times that British Treasury officials are looking at possibly raising billions of pounds in extra borrowing by using flexibility within the government's fiscal rules.

Finance minister John Healey told the newspaper there was "scope for more and more rapid investment". It said the cash could be spent on infrastructure, housing and help for business.

Former finance minister Rachel Reeves changed Britain's fiscal rules in 2024 to take into account public sector assets when considering the government's debt levels, offering the possibility of more public borrowing for investment.

Meanwhile, a survey of business activity on Wednesday by S&P Global showed Britain's dominant services sector returned to growth last month as new orders picked up. The survey also showed expectations for activity in the next 12 months were the highest since before the start of the Iran war in February.

"Stronger growth projections for the year ahead partly reflected hopes of de-escalating Middle East tensions and recent signs of easing inflationary pressures," said Tim Moore, economics director at S&P Global Market Intelligence.

(Reporting by Amanda Cooper; Editing by Kirsten Donovan)