The move raised fears of an ERM realignment and prompted buying of the German mark. The pound slipped against the mark to within less than a pfennig of its system floor, but against the dollar it rose above dollars 2 to close at its highest level for 10 years.
Despite the protests of European finance ministers, economists believe the pound and the lira could be devalued against the mark if France votes 'No'.
The mark was also boosted by the Bundesbank president denying that he had made a commitment not to raise German interest rates. Share prices fell in sympathy with the weaker pound. The FT-SE index of 100 leading company shares fell 34.5 points to 2,337.7.Reuse content