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.