LONDON (Reuters) - The British pound plunged on Wednesday to its lowest level against the dollar since 1985 and to a more than decade-low versus the euro as coronavirus fears and a global rush to hold dollars overshadowed stimulus efforts.

FILE PHOTO: Wads of British Pound Sterling banknotes are stacked in piles at the Money Service Austria company's headquarters in Vienna, Austria, November 16, 2017. REUTERS/Leonhard Foeger

Sterling has come under fierce selling pressure since hitting a two-month high above $1.31 last week but the selloff accelerated on Wednesday as traders dumped positions across the board in a mad scramble to get their hands on dollars.

Against the dollar, the pound plunged as much as 5% to $1.1452, falling past the $1.1491 level hit during the October 2016 “flash crash”. That was the lowest since 1985, according to Refinitiv data.

It then inched off those lows to $1.1615, down 3.6% on the day.

Against the euro, the pound fell as much as 3.5% to 94.33 pence per euro, its lowest level since March 2009.

Analysts said a rush by investors to snap up dollars - seen as a safe haven in times of crisis - and risk aversion towards Britain at a time when it already faces Brexit disruption were behind the moves.

“Sterling is in a very difficult situation - you don’t want any kind of extra risk in your portfolio,” said Ulrich Leuchtmann, head of FX and commodity research at Commerzbank.

“You might be positive about (Brexit) or not, but you knew you were taking additional risk, which is not required at the moment so there is a big motivation for dumping sterling at the moment.”

While long positions in the pound have reduced to some extent, they still remain near their highest levels in two years, according to latest positioning data.

Demand for dollars was rife in central bank dollar operations across the board and the greenback rose more than 2% against a basket of currencies to the highest since March 2017.

Banks borrowed more than $15 billion from the Bank of England’s U.S. dollar repo operations on Wednesday, part of measures announced by six central banks to keep the financial system working during the coronavirus outbreak.

“The pound has been hung out to dry as the insatiable appetite for dollars continues as a liquid funding currency. The huge market selloff is leading to a scramble for dollars despite the efforts of central banks to stem the tide,” said Phil McHugh, chief markets analyst at Currencies Direct.

Graphic: Pound dips

Pound traders shrugged off Britain’s plans for a 330 billion pound lifeline of loan guarantees and a further 20 billion pounds in tax cuts, grants and other help for businesses facing the risk of collapse. [nL8N2BA1M2]

But British government bonds suffered a torrid day, in line with a global selloff in debt markets following the announcement of trillions of dollars in stimulus by governments from Japan to the United States.

Ten-year British government borrowing costs spiralled almost 30 basis points on the day, their biggest one-day rise since 1998.

In addition, incoming Bank of England governor Andrew Bailey indicated policymakers were at least considering cash handouts to citizens to get the economy moving. Asked on printing money to give to individuals, he said he didn’t “rule anything out”.

Also on Wednesday, Britain ordered all schools to close from Friday as the number of confirmed coronavirus cases rose 48% from the previous day. That has economic and social repercussions for the world’s fifth-biggest economy, forcing many parents to stay home from work.

Graphic: World FX rates in 2020 here

Graphic: Trade-weighted sterling since Brexit vote here