The British pound ended a three-day winning streak against the US dollar on Monday while also weakening against the Japanese yen, as investors closely monitored the outlook for US interest rates and the latest intervention efforts aimed at supporting Japan's currency.

In trading, sterling fell 0.50% against the Japanese yen to 211.11 after touching 209.48, its lowest level since March 5.

The pound had also come under pressure last week following intervention by authorities in Tokyo and Washington in the foreign exchange market to support the yen.

Against the US dollar, sterling slipped 0.18% to $1.3457 after earlier rising to $1.35055, its highest level since July 16.

Government support

Britain's new government has adopted a policy approach aimed at easing investor concerns that had previously fueled the political risk premium attached to sterling, providing support for the currency despite the Bank of England's decision last week to leave interest rates unchanged.

UK Finance Minister John Healey said government departments would need to reduce their budgets to help finance the administration's spending commitments.

Meanwhile, the US Dollar Index was little changed, largely shrugging off Monday's decline in oil prices as investors awaited key US employment data later this week for fresh clues about the future path of US interest rates.

Expectations for further gains

Barclays said in a research note: "The negative risk premium embedded in sterling narrowed further last week, although by much less than we had expected given the dovish shift from Clare Lombardelli, the Bank of England's Deputy Governor and Monetary Policy Committee member who had previously been viewed as hawkish, as well as Governor Andrew Bailey, who is generally regarded as the committee's pivotal voice."

The Bank of England kept interest rates unchanged on Thursday as policymakers waited for greater clarity on the inflationary pressures that could emerge from the conflict with Iran.