July 7 (Bloomberg) -- London dropped out of the world’s top 10 most expensive cities for expatriates for the first time since 2001, sliding to 16th place from third, as the pound and rental prices slumped.

Tokyo replaced Moscow as the most expensive city for foreigners and Osaka moved to number two after the yen strengthened against the U.S. dollar, according to Mercer LLC’s Cost of Living Survey. The Russian capital, which had held the top spot since 2006, slipped to third.

“Many currencies, including the euro and British pound, have weakened considerably against a strong U.S. dollar, causing a number of European cities to plummet in the rankings,” Nathalie Constantin-Metral, a senior researcher at Mercer, said in an e-mailed statement.

London fell to one place below Caracas in Venezuela, which jumped from 89th. New York rose to eighth from 22nd, making it the only city in the Americas to be in the top 10. The pound has fallen 18 percent against the dollar in the past year, while the yen has strengthened 12 percent.

The stronger dollar means it’s now more expensive for companies based in Europe to send expatriates to cities in the U.S., according to the statement from Mercer, the human resources consulting unit of Marsh & McLennan Cos. Oslo slipped to 14th place from fourth, while Glasgow and Birmingham fell 60 and 59 places respectively, to 129th and 125th in the rankings.

Five of the top 10 are in Asia, with Beijing climbing 11 places to ninth spot, one above Singapore, which rose from 13th. Hong Kong gained one place to fifth.

Weaker currencies also affected cities in Australia and India. Sydney dropped 51 places to 66th, equal with Mumbai, which slipped from 48th, the release said.

Middle East Gains

Most Middle Eastern cities climbed in the rankings, as the United Arab Emirates dirham is fixed to the U.S. dollar, Mercer said. Dubai rose to 20th place from 52nd, and Abu Dhabi advanced to 26th position from 65th. Tel Aviv, the most expensive city in the Middle East, fell to 17th from 14th.

Rounding out the top 10 are Geneva in fourth, Zurich in sixth and Copenhagen in seventh.

The annual survey covers 143 cities and uses New York City as a benchmark for comparing the prices of more than 200 items, including housing, food, transportation and entertainment. The analysis is conducted by Mercer to help multinational companies gauge pay rates for international employees.

To contact the reporter on this story: Beth Mellorbmellor@bloomberg.net.

Last Updated: July 6, 2009 23:27 EDT