LONDON: Sterling skidded to its weakest since early September 2013 against a rallying dollar on Tuesday after data showed UK growth slowing in the third quarter, keeping pressure off the Bank of England to raise interest rates.
The euro, meanwhile, slipped to a 28-month low of $1.2211 after Greek lawmakers failed to reach a majority in favour of the official candidate in the second round of a parliamentary vote to elect a new president. That leaves open the possibility of early elections in which the anti-bailout Syriza party could take power.
Those gains helped the greenback hit its highest in almost nine years against a basket of major currencies at 89.845 . It has gained more than 12 percent since early July on the expectation that the Federal Reserve will hike rates some time in mid-2015 as the U.S. economy roars back to life.
Sterling fell by 0.4 percent to $1.5522 after UK growth was revised down from 3 percent to 2.6 percent year-on-year in the third quarter and as Britain's deficit with the rest of the world soared to 27 billion pounds.
"I suspect it was the GDP numbers that had a bigger impact on the market," said Simon Derrick, head of currency research at Bank of New York Mellon in London. "GDP is just kind of an early marker for the problems the pound may face next year."
The Australian dollar hit a 4-1/2-year trough of $0.8087 against its U.S. counterpart as prices of iron for construction fell in China and after Australia's premier warned of heightened "terrorist chatter" in the aftermath of the Sydney cafe siege a week ago.
"It's been a weak year for the Australian dollar, reflecting the slowing growth outlook for China, which has resulted in a further deterioration of Australia's terms of trade," said Lee Hardman, an economist at Bank of Tokyo-Mitsubishi UFJ in London.
"We still think there's scope for further downside."
A pre-Christmas rush of U.S. data due later in the day could further highlight the diverging policy outlook between the United States and most of the developed world.
Among them, third-quarter gross domestic product is expected to be revised up, putting U.S. economic growth above a 4 percent annualised rate for a second straight quarter.
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