The pound fell by more than one pfennig to a record close of DM2.3583 and dropped by about a US cent to dollars 1.4345, the lowest finish for more than six years.
But hopes of bigger company profits stemming from lower rates and devaluation sent shares up sharply. The FT-SE 100 Index hit a record of 2873.8, up 39.4 points.
The Danish kroner was the latest European currency to fall victim to speculation, dropping to its ERM floor of 3.9016 Dkr to the mark. Dealers believe that without a cut in German interest rates today it faces almost certain devaluation by the weekend.
That would leave the French franc exposed to a renewed assault and might herald the collapse of the European Monetary System in its present form.
The Treasury said yesterday that the pound's latest fall was having little impact on inflationary pressures, which remain weak.
Officials did little to discourage further speculation against sterling, and declined to warn that
interest rates could be lifted to halt the fall. Downing Street ruled out a detailed account of economic policy until the Budget on 16 March.
Tumbling pound, page 24