Sterling paused today, after surging almost 2% the day before, as improved investor sentiment sent the safe haven US dollar lower against major peers following the UK's dramatic U-turn on its fiscal plans.

The Bank of England is likely to further delay the start of its sales of billions of pounds of government bonds to help stabilise government bond markets after Britain's failed "mini budget", the Financial Times reported.

New British finance minister Jeremy Hunt yesterday scrapped most of Prime Minister Liz Truss's economic plan and scaled back her energy support scheme.

This marked a historic policy U-turn to try to stem a loss of investor confidence since former finance minister Kwasi Kwarteng announced on September 23 a string of tax cuts with no details of how they would be paid for.

After yesterday's almost 2% rally, sterling was down 0.1% against the US dollar to $1.1340.

Victoria Scholar, Head of Investment with Interactive Investor, said the events of the last week have caused declining confidence in the Conservative government to steer the economy.

"I think that the policies of Jeremy Hunt's predecessors who slashed taxes and spend and borrow heavily at a time when the UK economy is dealing with inflation was the wrong decision, so although there is lack of confidence in the political abilities right now," Ms Scholar said.

"I think the U-turn was the right decision," she added.

She said monetary and fiscal policy are now aligned, and that should help ultimately to bring inflation down to closer to target and stabilise the UK's economic outlook.

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Meanwhile, improved risk sentiment has bolstered the euro to $0.9872, its highest since October 6, with a fall in energy prices also supporting the single currency.

A key European benchmark for gas price fell to its lowest level in four months.

"Euro/dollar went under parity in late August largely driven by the negative terms of trade shock of higher energy prices. That energy shock is temporarily going into reverse as European gas prices drop sharply on the warmer weather and European governments having largely achieved their gas storage targets," said Chris Turner, global head of markets at ING in London.

The euro was last up 0.1% to $0.9855.

In the meantime, the weakening dollar brought little respite to the battered Japanese yen, which traded near a 32-year trough to the dollar at 149 yen, putting the major psychological barrier of 150 in focus.

The dollar-yen pair has strengthened around 3% in October, hemmed in by trader nerves following the Bank of Japan's first yen-buying intervention since 1998 on September 22.

Japanese Finance Minister Shunichi Suzuki said, following the recent Group of Seven gathering, that "there wasn't any discussion on what coordinated steps could be taken" about currency volatility.

The US dollar index - which measures the greenback against six major peers, including sterling, the euro and the yen - was down 0.1% at 111.99, after hitting its lowest level since October 6.

The UK news saw the risk-sensitive New Zealand dollar, already lifted by hotter-than-expected consumer inflation data, extend its surge, up 1% to $0.5691.

Consumer inflation in New Zealand continued to hover near three-decade highs in the third quarter, boosting bets for further rate hikes.

The Aussie also got new life from developments in Britain, after receiving a short-lived boost from minutes of the Reserve Bank's last meeting that showed the decision to slow the pace of rate hikes was "finely balanced."

The central bank's deputy governor Michele Bullock reinforced that by saying in a speech today that the RBA can keep pace with tightening by global peers.