Dominique Strauss-Kahn resigned Thursday as head of the International Monetary Fund (IMF), saying he did so with great regret but must focus entirely on clearing his name of sexual assault charges.

The move came after escalating pressure on the IMF to chart a course through the leadership crisis and promised to kick off a succession battle between emerging economies and Western nations that have long dominated the world body.

"I want to protect this institution which I have served with honor and devotion, and especially -- especially -- I want to devote all my strength, all my time, and all my energy to proving my innocence," Strauss-Kahn said.

"I deny with the greatest possible firmness all of the allegations that have been made against me."

His short statement paid tribute to his American-born wife, journalist Anne Sinclair, who he said he loved more than anything, and spoke of his "infinite sadness" at being compelled to leave a job to which he had also been devoted.

Strauss-Kahn, a leading French politician, is currently in jail awaiting a grand jury decision on whether to indict him on charges of the alleged sexual assault and attempted rape of a 32-year-old Manhattan hotel chambermaid.

His lawyers were expected to tout his wife's American credentials before a judge later Thursday in a fresh bid to free him from the tough Rikers Island jail, where he spent his third night in isolation and on suicide watch.

The new bail application argues that he should not be considered a flight risk because he has strong US ties through property and family.

The application mentions a $4 million home in Washington, DC, a daughter in New York, and says Sinclair is "currently working on a book about American political life."

In addition to the $1 million Strauss-Kahn's lawyers said he can post for bail, they said he is willing to be confined to a Manhattan apartment 24 hours a day, with electronic monitoring, until the case is resolved.

"These additional bail conditions eliminate any concern that Mr Strauss-Kahn would or could leave this court's jurisdiction," attorney Shawn Naunton wrote.

The chambermaid, who has accused one of the world's most powerful men of trying to rape her on Saturday in his luxury hotel suite, earlier went before the grand jury that must decide if there is enough evidence to go to trial.

The single mother of a 15-year-old daughter alleges that Strauss-Kahn groped and mauled her in his room in the posh Sofitel hotel in Times Square and forcibly tried to have oral sex with her.

Her lawyer, Jeff Shapiro, refused to comment on the closed-door grand jury proceedings but hit back at claims his client was part of an elaborate set-up intended to bring down the man once seen as a leading presidential hopeful.

Shapiro has shot down the idea that his client, an immigrant from Guinea in West Africa, had consented to a sexual encounter and suggested forensic evidence would back her up.

Strauss-Kahn has denied all seven counts of alleged sexual assault and attempted rape, as well as unlawful imprisonment.

But he was refused bail on Monday by a judge and is desperate to leave Rikers Island jail, where he has been made to wear slip-on shoes with no laces and a special grey jumpsuit.

US media reports said New York police had gathered evidence from the hotel suite, including bodily fluids taken from a spot where the maid remembered spitting during Saturday's attack and which were now being tested for DNA.

Strauss-Kahn's top lawyer Benjamin Brafman told the bail hearing on Monday that the evidence "will not be consistent with a forcible encounter," and New York media reports quoted a source close to the defense as saying "there may well have been consent."

The scandal has thrown the French political scene into disarray, as Strauss-Kahn had been seen as a strong contender to defeat President Nicolas Sarkozy in next year's elections.

Strauss-Kahn's Socialist Party on Thursday urged Sarkozy to pressure the United States to insure that the now former IMF chief receives a fair trial.

His resignation comes at a critical time for the IMF, which is engaged in delicate negotiations to help overcome the eurozone debt crisis.

"The Fund will communicate in the near future on the Executive Board's process of selecting a new Managing Director. Meanwhile, Mr. John Lipsky remains Acting Managing Director," the IMF said.

Germany meanwhile said it "respects" Strauss-Kahn's decision to step down because it will allow the IMF to return to normality and praised his work for the institution.