Sterling tumbled broadly on Monday, hitting a one-month low against the dollar, as wariness over the economy and expectations the Bank of England would increase its asset buying programme weighed on the UK currency.
Sterling fell to $1.6100, its weakest since early June. At 0814 GMT, it was down 1.3 percent at $1.6116.
Traders cited macro and model funds selling the pound against the U.S. currency. Stop-loss orders triggered around the $1.62 region also accelerated the move, they said.
"In the short term, the dollar will benefit from the growing uncertainty about recovery prospects and any related increase in risk aversion although it seems unlikely that it will break out of current ranges," said analysts at Calyon in a note.
Caution about the global economic outlook increased after dismal U.S. payrolls figures released on Thursday.
Shares prices also fell sharply in early trade, pushing investors to unwind trades for buying perceived riskier assets, particularly against the yen.
London's FTSE index was down more than one percent on the day, falling to 10-week lows, ahead of the start of second quarter earnings.
The pound slumped around 2.0 percent against the yen to 153.16 yen, a five-week low. Market participants said slide in the pair helped drag sterling lower across the board.
The euro was up 1.0 percent at 86.41 pence according to Reuters data, its highest in roughly a month.
Traders remained wary ahead of the BoE's policy meeting on Thursday. Industrial production data is due out on Tuesday.
The BoE is widely expected to leave key interest rates at a record low 0.5 percent. Focus is on whether it expands its quantitative easing target.
Many predict the central bank will expand its 125 billion pound asset buying programme by a further 25 billion pounds to the maximum permitted without further finance ministry approval, or possibly ask for more.
"While the yen and the dollar are the two best performing currencies at the start of the week, the pound is one of the worst," said Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ in London.
"We doubt the MPC will take any action this week on extending the QE fund beyond 150 billion pounds, although speculation on this is likely to weigh on the pound for now."
Meanwhile, finance minister Alistair Darling said in Sunday's News of the World reforms to be unveiled this week would subject banks to tough new rules to prevent a repeat of the worst financial crisis to hit the country in decades.
