Sterling stays broadly weak

Sterling slipped again on Thursday, staying near a 23-year low against the dollar on persistent concern that the UK is heading for a deep financial crisis while the economy languishes in a recession.
The pound briefly fell more than two percent on the day, hovering above $1.3620 hit on Wednesday for the first time since September 1985, as UK shares remained volatile following deep losses early this week on speculation that another government bailout plan may not be enough to save the banking sector.
Figures showing a tumble in UK factory orders and a drop in automobile output also gave investors reason to sell sterling, as they bolstered the view that the Bank of England will have to do more than cut interest rates to salvage the economy.
Analysts said that sterling continued to suffer from extreme risk aversion given the dismal state of the British banking system. "The major theme in the UK is the financial sector, which is still under immense strain," said Lee Hardman, currency analyst at BTM UFJ in London.
By 1525 GMT, the pound traded 1.8 percent lower at $1.3725, after falling as low as $1.3690. Earlier on Thursday, the pair had climbed as high as $1.4025, but was unable to hold onto those gains. "The market has found resistance around $1.40, given the view that sterling will continue to suffer," said Naeem Wahid, currency strategist at Bank of Scotland Treasury Services in London.
Since the start of the week, the pair has tumbled roughly 7 percent, its biggest weekly fall since late October, as volatility in the currency has shot up. It has crashed roughly 30 percent since July, when one pound bought $2.
The euro rose as high as 94.67 pence, edging towards a record high around 98 pence hit at the end of December. Market participants said that bids for the euro against the pound were also pressuring sterling/dollar lower.
Sterling's losses against the euro sent the pound lower against a basket of currencies. On a trade-weighted basis, sterling fell to 73.8, not far from 73.3 hit in December, the lowest level according to daily BoE records dating back to 1990. Against the yen, the pound fell nearly 3 percent to 121.17 yen, having slumped to a record low of 119.36 yen on Wednesday.
Keeping sterling weak was a manufacturing index showing that UK factory orders tumbled to -48 in January from -35 in December, falling more than expectations, while separate data showed UK car output fell at its sharpest pace in 20 years.