The office for National Statistics revealed that public sector net borrowing, the government's preferred measure of the public finances, stood at 9.2 billion pounds, way ahead of last year's equivalent 6.3 billion and analysts' expectations for a 7.5 billion pound shortfall.

The deficit in June is the highest for the month, traditionally a deficit month, since records began in 1993.

Chancellor of the Exchequer Alistair Darling is now looking increasingly unlikely to meet his fiscal targets for the year with the news that the UK recorded its biggest monthly deficit for June and debt levels are near to breaching the government's self-imposed ceiling.

Additionally, a newspaper report that the Treasury may revise its self-imposed borrowing limits also dented the pound.

This could effectively give it more leeway to increase borrowing as a way of mitigating the effects of anticipated economic slowdown.

Elsewhere, the dollar remained relatively firm against the euro after Citigroup reported a smaller-than-expected second-quarter loss.

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