Sterling plunged 5 per cent to its lowest level against the dollar in over three decades and dropped by more than 2.5 per cent against the euro as the shocks caused by the coronavirus rippled through global markets.

Sterling has also suffered due to heightened global demand for the dollar, with a gauge of dollar strength up for a seventh session.

“A combination of the safe haven dollar bid, the global asset sell-off and liquidation of long positions from the election are all weighing on the pound,” said Neil Jones, head of foreign exchange sales to financial institutions at Mizuho Bank.

Sterling fell as much as 5 per cent to $1.1453, surpassing even the lows it recorded in the aftermath of the 2016 Brexit vote. It was last lower in 1985, when the world’s richest nations signed the Plaza Accord to weaken the dollar and haul the US economy out of a recession.

Sterling was trading at around 93.25p against the euro as European markets closed. A day earlier, it had been at 91.04p.

Bank of England

New Bank of England governor Andrew Bailey commented on sterling’s downward slump during a call with reporters on Wednesday, where he said the bank can do more to minimise the economic impact of the coronavirus in concert with the UK treasury.

“We watch it very carefully,” he said. “I don’t have a particular single story as to why what’s happening is happening. We’ve got a Monetary Policy Committee meeting next week. We will take it into consideration, consider carefully what the effects will be.”

Alongside sterling, UK sovereign bonds plummeted after the government announced a rescue package for businesses in an attempt to stop the coronavirus wrecking the domestic economy.

The yield on 10-year UK bonds rose to the highest in over two months, while the FTSE 100 stock index fell 4.1 per cent. – Bloomberg