Sterling gained against the dollar and euro as the military tension mounted in Kosovo.
Sterling closed at $1.6380 from $1.6324 and at 66.50p from 66.74p against the euro. In consequence the pound fell to 84.47p against sterling from 84.74p.
"A conflagration in Europe looks negative for the euro and looks negative for the dollar" said Mr Glenn Davies, chief economist at Credit Lyonnais.
Analyst Mr Ray Attrill at 4CAST also noted that the news that the UK's One2One telephone network might be up for sale for £11 billion sterling (€16.5 billion) had also spurred anticipation of massive foreign exchange flows that will be in favour of sterling.
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