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The FTSE 100 index has narrowly missed out on an all-time closing high after slipping back from record levels.

The UK's benchmark index hit its highest ever level during trading at 7,129.83 shortly after midday.

But it then fell back in the afternoon, to finish the day 0.4% lower at 7,070.88 points.

Analysts said the stocks initially gained from falls in sterling, which extended its worst run since the Brexit vote to drop below $1.22 and €1.10.

The fall in the pound has boosted the FTSE 100 as many of the companies in the index generate most of their revenues abroad.

A weaker pound means overseas revenues are worth more when they are converted back into sterling.

Who's afraid of the falling pound?

Ahmed: The pound's fall and why it matters

Viewpoints: How low can the pound go?

The index broke its last intra-day high from 27 April 2015, when it reached 7,122.74 points, but could not hold on to beat that day's record closing high of 7,103.98.

Neil Wilson, a markets analyst at ETX Capital, said: "Brexiters might point to the FTSE's rise as a sign of strength, but this is very much a story of sterling weakness boosting foreign earnings."

FTSE investors took their profits in the afternoon, sending the index down again, because "this is not a rally based on lots of confidence", he told the BBC.

"The weak pound is 'good' for the 100 but overall we have to remember that the weak pound is a symptom of much deeper worries about the UK economy and Brexit," he added.

Falling further

Sterling fell nearly 2% against the dollar on Tuesday to hit $1.2106 and 1.1% against the euro to €1.0964.

The pound is at its lowest level since Friday's flash crash, when it tumbled to around $1.18 before recovering.

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Analysis: Kamal Ahmed, BBC economics editor

Why does the fall of the pound matter?

On the upside, it matters for exporters which are boosted as their goods are far cheaper on foreign markets.

It matters for multinational companies like pharmaceutical firms which earn much of their income in dollars. It matters for the tourism industry in the UK, as foreign visitors flock here for bargains and good value holidays.

On the downside, it matters for tourists travelling abroad who will find everything they buy much more expensive.

It matters for the food and fuel this country imports as it becomes more expensive. It matters for inflation, as the rise in import costs feeds through to businesses and the High Street.

And remember, it does not need much of a rise in inflation to wipe out real income growth which at present is running at around 2%. If real incomes start falling, that is when the fall in sterling becomes a truly political issue.

Because the pound in your pocket will actually be worth less.

Read Kamal's blog in full

Some traders said sterling's further falls were linked to reports on Tuesday that Russian bank VTB and US banks Citi and Morgan Stanley could move staff outside of London, adding to worries about foreign investment leaving the UK.

Others pointed to leaked documents warning that a withdrawal from the EU single market could cost the Treasury more than £66bn a year.

'Flash crash was right'

Also on Tuesday, a senior official at Norway's sovereign wealth fund, the world's largest, said Friday's flash crash had correctly reflected expectations for the UK economy.

The fund is one of Britain's biggest foreign investors, holding shares in most large UK companies and a stake in London's Regent Street.

Oeyvind Schanke, the fund's chief investment officer for asset strategies, told Reuters: "I do believe in market forces and I do believe that investors have an ability to price. And what that price move indicates to me is that they are worried about what is happening in the UK."

'Not a crisis'

Sterling has now fallen about 18% against the dollar since the referendum to lows not seen since 1985.

However, the UK is not facing a "currency crisis", according to Gerard Lyons, the former chief economic adviser to Boris Johnson and a leading Brexit campaigner.

"There's no hard and fast rule, but you tend to know a currency crisis when you see it," Mr Lyons, who is now a strategist at Net Wealth Investments, told the BBC.

"Effectively a currency crisis is when it's seen as out of control and it starts to force policy to do things that are not in the best interests of the domestic economy."

He added that a fall in sterling was "inevitable, whatever the outcome of the referendum" because it had been one of the world's most overvalued currencies.