Sterling has continued its nosedive as it hits a 10 year low against the US dollar, sinking to $1.3751.
In just one week sterling has fallen 4.5% against the euro, 5.8% against the yen and 6.1% against the dollar.
City analysts have warned the UK remains more vulnerable to capital flight compared to the US, despite both being in the grips of the banking crisis.
"As equity markets continue to fall, investors look to safe haven currencies and the dollar is one of the main beneficiaries of this flight to quality," said James Hickson, managing director of Caxton FX.
He believes further pressure is being piled on sterling as UK banks look for more government investment with calls for Lloyds and RBS to be nationalized.
"This could well lead to the U.K having its government debt being downgraded from its current AAA rating," he said.
While some experts anticipate parity with the dollar, not seen since 1985, the foreign exchange company predicts the pound will fall to $1.20 over the next month or two, mainly due to the weakness in the UK banking sector.
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