Political uncertainty around the Trump administration continued to send shockwaves through global markets on Thursday as the dollar lingered near a six-month low.

Overnight, stocks in Asia fell sharply, tracking dramatic falls on Wall Street on Wednesday after reports that Donald Trump had asked former FBI Director James Comey to end an investigation into National Security Adviser Michael Flynn during an Oval Office visit back in February.

The FTSE 100 lost 0.89 per cent to finish the day at 7436.42, following Wednesday's 0.25 per cent decline.

However, the Dow Jones Index opened up slightly on Thursday, as did the S&P500, after both US stock indexes had seen falls of around 1.8 per cent on Wednesday

The Trump reports had sparked speculation that obstruction of justice charges might be laid against the US President.

That in turn has weakened investor confidence in the Trump's power to implement some of the aggressive stimulus measures he has been championing.

"The Trump rally seems to be a theme of the past," said Lukman Otunuga , an analyst at FXTM, adding that stock markets could be in store for "further punishment moving forward as political turmoil in the US and ongoing geopolitical tensions are adding to the mounting uncertainty over Trump".

Since his campaign, the former businessman has been vowing to rollback regulation and cut taxes dramatically - both promises that have particularly supported financial stocks.

Strategists at UniCredit wrote in a note that "recent rise in political tensions" was denting "expectations of US reflationary policies".

But some are now speculating that the latest move could even lead to Mr Trump leaving the presidency.

The dollar index, which measures the buck’s strength against a basket of other major currencies, was trading at its lowest level since Trump's election last November on Thursday afternoon at 97.576.

Gold, which - like Japan’s yen and the Swiss franc – tends to be sought during times of political uncertainty, hovered near a two-week high.