The British pound erased early gains after an unexpected interest rate cut by the Bank of England on Wednesday, while the dollar resumed its descent against the safe-haven Japanese yen and Swiss franc on fears over the spreading coronavirus.
Sterling last traded at $1.2873, almost flat on the day but tumbled from the day's high of $1.2937 after the Bank of England cut its policy rate for the first time since August 2016, by 0.5 percentage point to 0.25%.
"Markets had priced in more than 25 basis points, but not the full extent of 50 basis points," said Moh Siong Sim, currency strategist at the Bank of Singapore.
"But it's not a surprise in the sense that the market was kind of expecting the bank to team up with the U.K. government...it looks like that 50 basis point rate cut could signal that we could expect something quite substantial from the budget itself."
The BoE's move comes as a number of central banks and governments around the world stepped up efforts to shore up their economies from the economic impact of the coronavirus epidemic.
The recovery in safe-haven currencies mirrored falls in US equity futures and US bond yields in Asian trade on Wednesday, as the spread of the virus in major economies threatens to brake business activity and curb consumer spending.
The dollar lost 0.9% to 104.67 yen, down more than a full yen from Tuesday's high of 105.915.
The dollar had fallen to as low as 101.18 on Monday. While Japan may already be in recession, its currency normally rises at times of major financial market stress because of the country's current account surplus and its net creditor status.
The Swiss franc gained 0.65% to 0.9335 franc per dollar while the euro also rose 0.6% to $1.1349.
The dollar jumped on Tuesday as investors hoped global monetary policymakers would launch further stimulus plans to reduce the drag on economies from trade and travel disruptions.
But a lack of clarity on what Washington will do has kept many investors on guard.
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