The dollar edged higher against sterling and the euro on Thursday after two straight days of declines as investors became more cautious ahead of political announcements in Britain following the country's vote to exit the European Union.
Former London Mayor Boris Johnson, who was bookmakers' runaway favorite to become Britain's prime minister, pulled out of the race on Thursday in a shocking announcement less than a week after leading the "Brexit" campaign.
Sterling was last down 1.30 percent against the greenback at $1.3252 after gaining as much as 1.5 percent to $1.3534 on Wednesday.
Further stimulus measures may soon be needed for the U.K. following the country's vote to leave the European Union, Bank of England Governor Mark Carney warned Thursday.
He forecast a "material slowing" in economic growth as a result of last week's referendum, whose outcome stunned financial markets.
The euro fell 0.37 percent against the greenback to $1.1082 after hitting a nearly one-week high of $1.1155 early on Thursday.
"People just want more clarity on the political situation before committing to a longer-term view on sterling," said Citi G10 currency strategist Josh O'Byrne in London.
In addition, Paul Christopher, head global market strategist at Wells Fargo Investment Institute in St. Louis, said traders who were removing short bets against sterling and the euro on Wednesday may have stopped doing so, while others may be placing new bets against sterling.
China's offshore yuan currency was down just 0.16 percent at 6.6459 per dollar. It had hit a roughly six-month low of 6.6991 after government economists and advisers involved in regular policy discussions told Reuters the People's Bank of China was willing to let the currency depreciate by as much as last year's record decline of around 5 percent.
The dollar index, which measures the greenback against a basket of six major currencies, was last up 0.4 percent at 96.15 after falling as low as 95.443 early on Thursday.
The dollar was up 0.40 percent at 103.22 , it was down 0.31 percent against another perceived safe-haven, the Swiss franc, at 0.9769 franc. O'Byrne of Citi said fading risk appetite helped the franc gain.
On the last day of the second quarter, the period was on track to be sterling's weakest against the dollar since the fourth quarter of 2008.
The dollar index was set to gain about 1.3 percent for the quarter. The greenback was on track to post a more than 7 percent decline against the yen for June to mark its weakest month since October 2008.
-Katy Barnato contributed to this story