Sterling tumbled to fresh 7.5-year lows against the dollar today as UK banking shares took another beating, while the euro broadly edged higher.
The pound, which has fallen roughly seven percent against the US unit since the start of the week, extended losses on concerns that UK banks will need to shore up their financial health as the economy deteriorates, and that a government package announced earlier in the week may not help.
Shares in Barclays and Lloyds Banking Group posted double-digit declines in morning trade, pulling the top index of UK shares lower.
“Sterling and UK banks remain the dominant theme in currency markets. As long as UK banking stocks are down, we don't see a big reversal in sterling,” said Adarsh Sinha, currency strategist at Barclays Capital.
“Financial sectors in other countries are not doing any better than Britain, but sterling is an easier target because it is not a reserve currency such as the dollar or euro and thus more vulnerable to problems,” he added.
By 12.01pm, sterling was down 1 per cent at $1.3762 after falling to $1.3715, the lowest since June 2001.
The British unit was at 123.62 yen, down 0.8 per cent after hitting a record low of 123.01 yen.
The euro rose to 93.80 pence, its strongest since the start of the month though off a record high around 98 pence hit last month.
Barclays shares tumbled a third in value to a 24-year low. London's index of top shares was down 1.5 percent by midday trade.
Data today showed a sharp deterioration in Britain's public finances and a rise in joblessness, but such data and the release of minutes from the latest Bank of England policy meeting were overshadowed by banking sector woes.
Reuters