Coronavirus: Pound falls to lowest level against the dollar for 35 years

Sterling drops to lowest level against dollar since 1985

The pound fell a further 1 per cent on Thursday after plunging to its lowest level against the dollar since 1985. Sterling has now dropped against the dollar seven consecutive days of falls prompted by the coronavirus pandemic.

Sterling fell 5 per cent to $1.15 on Wednesday, its worst exchange rate against the dollar in 35 years. Analysts said some of the fall may be down to the dollar's strngth rather than the pound's weakness.

However, sterling was also down 0.2 per cent against the euro on Thursday morning and has fallen more than 12 per cent against the single currency in the past month to €1.06.

The pound began its fall after the Bank of England slashed interest rates last week by 0.5 per cent to 0.25 per cent – a record low – in a bid to prop up the economy.

Chancellor Rishi Sunak announced a £330bn stimulus package of government-backed loans and grants for businesses on Tuesday but it was not enough to calm the panic in markets.

The FTSE 100 dropped another 5 per cent on Wednesday with easyJet and online estate agent Rightmove among the biggest fallers.

Analysts at UBS forecast that the pound will make up some of its lost ground in coming months as the economy recovers.

“The level of fiscal-monetary coordination by the UK government and the Bank of England strengthens our conviction that sterling is set for a rebound once the global economy stabilises,” said Thomas Flury and Dean Turner of UBS Global Wealth Management.

They added: “Brexit remains an obstacle to GBP repricing, but with the negotiations seemingly paused and now not the priority for both the UK and the EU, the end of the transition period may have to be delayed beyond end-2020.”

The UK and much of Europe look set to enter a recession as governments enforce lockdowns and social distancing measures to halt the spread of coronavirus.

That has put huge strain on businesses including airlines, pubs, restaurants and hotels, which have seen a sharp fall in revenues.

Airline industry bosses are expected to hold talks in the coming days over a multibillion-pound bailout to keep them afloat.

Hospitality and leisure businesses under a certain size can apply for government grants of up to £25,000 to help them deal with cashflow problems as trade drops off.

But business groups called for more help, with the Confederation of British Industry proposing the government pays firms through the National Insurance system.

The plan would reverse the normal NI payments made by firms on the wages they pay. Instead, the government would hand money to employers to help them with their wage bills.