Sterling hit a one-year low against the dollar and a record low versus the yen on Thursday after the Federal Reserve warned of significant weakness in the US economy, prompting investors to slash exposure to riskier currencies and assets. The pound tumbled to $1.5326, its lowest since September 2010, with the next target being the low hit that month of $1.5296. It also hit a record low against the yen around 116.96 as market players sought safety in the US and Japanese currencies.
The outlook for sterling remained bleak after Wednesday's Bank of England minutes flagged policymakers' increased readiness to ease monetary policy further. Meanwhile, the Federal Reserve warned of "significant downside risks" to the US economy but stopped short of expanding its own balance sheet.
This sparked sharp falls in risk-related currencies, including the pound, as fears about the risks facing the global economy increased. Sterling was last down 0.85 percent at $1.5360, tumbling from a high of $1.5742 on Wednesday. "There is a pent up desire to sell risk assets, including sterling," said Steve Barrow, head of G10 currency research at Standard Bank. The euro was up 0.1 percent at 87.65 pence, below Monday's high of 87.95 pence.