Britain's pound rose almost 1% today, rebounding from its biggest weekly drop in a year, after British prime minister Theresa May said she would resist challenges to her leadership.
May hinted at the weekend that she may be considering a cabinet reshuffle to reassert her authority.
This raising questions over the fate of foreign minister and Brexit campaigner Boris Johnson, who has been accused of undermining her.
Sterling rose 0.9% to $1.3180 - recovering from the 2.5% it lost last week - and was the biggest gainer among major currencies against a broadly muted dollar.
It also rose 0.8% to 89.08 pence per euro.
The pound has become more sensitive to political noise in recent months.
Some strategists said Johnson's departure, if it happens, could increase the chances of a "soft Brexit", which might be positive for sterling in the short term.
Speculative investors, meanwhile, turned more positive on the pound in the week to October 3 than at any time since September 2014, according to data from the Commodity Futures Trading Commission.
Analysts said this long positioning was the result of heightened expectations the Bank of England will raise interest rates soon.
Last week's losses had dragged down sterling from a June 2016 high of above $1.3650 hit in late September and erased all its gains sustained after the Bank of England signalled in mid-September an interest rate increase was likely in the coming months.
Adding to sterling's woes have been weak economic data releases pointing to tepid growth in Britain’s economy.
Figures on Friday showed British economic productivity fell at its joint-fastest annual rate since 2013 in the 12 months after the country voted to leave the European Union.