The Sunday Times reported that 40 lawmakers from British Prime Minister Theresa May's Conservative Party had agreed to sign a letter of no-confidence in her, eight short of the number needed to trigger a leadership contest.
The move was viewed as likely to weaken May's hand in Brexit negotiations, analysts said.
"That just highlights some of the internal weakness that the Conservative party has within its own self and I think that's going to undermine the Brexit negotiations going forward," said Sireen Harajli, foreign exchange strategist at Mizuho in New York.
"The pound has been struggling a little bit on that overnight," she said.
Sterling was down 0.56 percent to $1.3114. Earlier it fell to $1.3188 its lowest since Nov. 6. It also fell below its 100-day moving average, a key technical level.
"The price action suggests that sentiment towards the Pound remains bearish, despite November's rate hike," Lukman Otunuga, research analyst at FXTM in London, said in a note.
"Further downside is likely to be on the cards, on the back of political jitters and Brexit risk," he said.
The dollar edged higher against a basket of other major currencies on Monday, recovering ground after a 0.6 percent decline last week.
Worries that a proposed US corporate tax cut could be delayed to 2019 have pressured the greenback recently, but the dollar was on a firmer footing on Monday ahead of important domestic economic data, including inflation and retail sales numbers, due later this week.
"I think investors are happy to just kind of stay on hold today in anticipation of the information that we are going to be getting later on this week," Mizuho's Harajli said.
The euro was little changed as investors awaited a conference on Tuesday where central bankers may share their thoughts on the global economy.
European Central Bank chief Mario Draghi, Federal Reserve Chair Janet Yellen, Bank of Japan Governor Haruhiko Kuroda and Bank of England head Mark Carney will form a panel at the ECB-hosted conference in Frankfurt.
The Canadian dollar weakened against its US counterpart, paring some of its recent gains.