The pound tumbled to a new 31-year low on Wednesday, dipping below $1.28 at one point before recovering a little, as investors shunned the currency after Britain's vote to leave the European Union.
The pound, one of the main vehicles through which financial markets can express concern over the Brexit vote, fell as low as $1.2798 in Asian trading, its lowest since June 1985, before recovering to about $1.2965 by 1130 GMT. That still left it 13 percent below its levels before the June 23 referendum, and about 0.4 percent down on the day.
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Against the euro, sterling hit a three-year trough, trading as weakly as at 86.29 pence per euro before climbing back to about 85.25 pence, also down 0.3 percent on the day.
Worries have grown in the past two days about financial stress, highlighted by the Bank of England on Tuesday and by the suspension of trading by three of Britain's biggest property funds, following an increased number of investor redemptions since the referendum.
"The pound is still very volatile after the Brexit vote, and still vulnerable to the downside," said Bank of Tokyo-Mitsubishi UFJ currency economist Lee Hardman.
"Yesterday the main trigger was the reports of signs of distress in the commercial real estate market, which the Bank of England highlighted as one of the financial stability risks in the UK. That created a fairly large sell-off...and sterling is just recovering some of those falls."
The latest of the property funds to announce a suspension in customer withdrawals was M&G, the fund management arm of insurer Prudential, which made the announcement after the London market close on Tuesday.
"Clearly Asia came in and didn't like what it saw in the news flow," said UBS Wealth Management currency strategist Geoffrey Yu, adding that many international investors also have large exposures to the UK property market.
The Bank of England also expressed concern on Tuesday about a fall in investor demand for British assets, which could make it harder to finance Britain's large current account deficit, piling further pressure on the pound.
Next week the BoE will make a decision on interest rates, which are already at record lows. Investors are pricing in a 25 basis point rate cut in August, which is also helping to drive down the pound, but some reckon a cut could come next week.
A Reuters poll of more than 60 foreign exchange strategists forecast the pound at $1.27 by year end from Monday's close of around $1.30.
"The market is still likely under-pricing BoE easing, with our economists forecasting a 25 basis point rate cut next week followed by a 25 basis point cut at the August meeting," wrote BNP Paribas strategists in a research note, adding that they also expected an asset-purchase program to be announced at the November meeting.
Yields on British 10-, 20- and 30-year government bonds sank to fresh record lows, extending their slide since the day after the shock referendum result.
The yield on 10-year gilts fell as low as 0.731 percent, almost half its level on June 23, when Britons were voting in the referendum which many investors had expected to keep Britain in the EU.
(Additional reporting by William Schomberg; Editing by Ruth Pitchford)