NEW YORK (AFP) - The pound reversed course on Wednesday (July 13) and gave up much of previous gains after a new British government was formed by Prime Minister Theresa May with Mr Philip Hammond as finance minister.

The pound had surged on Tuesday on news of a quick political handover in London after the shock vote to exit the European Union had raised worries of a long wait before a new leadership took control.

On Wednesday the currency gave up 0.8 per cent on the dollar at US$1.3144 and 1.0 per cent on the euro at 84.36 pence.

While the selection of pro-Brexit campaign leader Boris Johnson as foreign minister dismayed some, Mr Hammond was seen as a good choice as chancellor of the exchequer.

Though an EU critic, Mr Hammond had argued against a breakup as foreign minister in the David Cameron government before the June referendum.

The job will put him at the centre of negotiations with the EU on Britain's departure.

Analysts said his understated style is likely to reassure investors given the volatility of the markets and fears of a recession sparked by the Brexit decision.

Meanwhile the euro edged higher against the dollar, but at US$1.1089 was within the pair's range since the end of June.