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British ministers had identified Kelly as the probable source of a BBC report that alleged that government officials had "sexed up" evidence of Iraq's lethal weapons to justify the war.
Kelly denied he was to blame.
His death marked a dramatic twist in a political crisis over Britain's pre-Iraq war intelligence.
The news of his death hit sterling on international currency markets as strategists said it further damaged the government's credibility, undermined by the raging weapons row.
The opposition has called for Blair's resignation, saying he exaggerated the case for war.
Kelly's death puts a question mark over the future of a top Blair aide, communications chief Alastair Campbell, and a number of government ministers who had named Kelly as the likely source of the BBC report.
The affair looked set to overshadow Blair's week-long tour of the Far East but his spokesman insisted on Saturday that the trip would not be cut short, as the opposition has demanded.
Blair had hoped to have a break from domestic strife during the tour to Japan, South Korea, China and Hong Kong.
Kelly was grilled in parliament on Tuesday after admitting he had met a BBC correspondent who aired the report over the alleged doctoring of intelligence. But he said he did not believe he was the source for the story.
Two days after the inquisition, Kelly, visibly uncomfortable in the media spotlight, went missing. British police said yesterday they had found a body matching his description. They were not treating his death as suspicious.
Asked if the government felt any share of the blame for Kelly's death, Blair's spokesman said the independent inquiry would "look at all these issues".
Blair said Kelly's death was "an absolutely terrible tragedy" and he called him "a fine public servant".
The media spotlight immediately turned to Campbell, who was singled out in the BBC report for exaggerating the threat from Iraq's weapons.
Asked if Campbell had offered his resignation, Blair's spokesman said: "Not that I am aware of."
- Reuters
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