The pound has gained very slightly against sterling as the UK currency sank to seven year lows against the dollar.
The euro also held just above record lows against the dollar for the first time in three days on Friday, supported by comments from euro zone finance ministers and the president of the European Central Bank.
Sterling has been under pressure since the Bank of England's decision on Thursday to keep rates steady at 6 per cent for the seventh month in a row.
Mr Aziz McMahon, economist at Ulster Bank, said the market now believes that interest rates may have peaked in the UK. As a result sterling may continue falling against the dollar. However, he added that it is likely to hover around current levels against the euro as both remain weak against the strong US currency.
Sterling fell below $1.42 for the first time since February 1993 and is now within 1.5 cents of the lows for the decade against the dollar which were hit within months of sterling's exit from the European exchange-rate mechanism in September 1992.
Sterling even fell back against the weakening euro, losing about 0.5 per cent on the day in a move which is good news for Irish inflation. According to Mr McMahon this is marginally better news for Irish inflation as a further weakening of the pound against sterling would add substantially to rising import prices hence boosting inflation.
Sterling's decline against the dollar will also be welcomed by UK exporters who have been suffering competitive losses as a result of the currency's past strength. Sterling's trade-weighted index is down more than 1 per cent this week.
Sterling closed at 60.94p against the dollar from 60.67p a day earlier and at 77.30p against the pound from 77.04p a day earlier. The euro closed at $0.8659 from $0.8718 on Thursday, while in late trading it went to $0.8672 following the statement from the finance ministers and verbal support from ECB president Mr Wim Duisenberg.
Breaking his recent silence Mr Duisenberg said the euro's weak level is a cause for concern, particularly as it could spark inflationary pressures and undermine confidence in the Union.
