Sterling stood near five-year lows hit earlier against the dollar on Friday, pressured by a flight from riskier assets as global stock markets tumbled. Investors cut exposure to risk and sold bond holdings for cash on fears of a global financial system meltdown and steep economic downturn after co-ordinated central bank interest rate cuts earlier this week failed to calm fears.
The pound recovered briefly as UK share prices pared their losses, tracking a rally in US stocks, which stood around 4 percent down on the day after plunging more than 8 percent.
But the downside momentum dominated as markets looked to policymakers for a financial salve. "The sharp decline in equities has woken up global policymakers to the risks involved," said Ian Stannard, senior currency strategist at BNP Paribas. At 1512 GMT, sterling was down 0.4 percent at $1.6990 in choppy conditions. Earlier, the pound hit a five-year low of $1.6802. The euro was down 0.2 percent at 79.37 pence.
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