Sterling slid to three-month lows in Asia this morning, with investors spooked anew by concerns over Britain's divorce from the European Union, while US policy uncertainty lingers ahead of President-elect Donald Trump's inauguration.

The pound sank as low as $1.1983 this morning, depths not seen since the flash crash of October, having finished around $1.2175 in New York on Friday.

Meanwhile, the euro was up over 1% against the pound by 7.30am to be valued at £0.8836, however, sterling has since recovered to £0.8783.

Dealers said the market was reacting in part to a report in the Sunday Times that UK Prime Minister Theresa May will use a speech tomorrow to signal plans for a hard Brexit, quitting the EU's Single Market to regain control of Britain's borders.

Investors have been worried such a decisive break from the single market would hurt British exports and drive foreign investment out of the country.

"It is impossible to say by how much a hard Brexit could weaken GBP, but we do not believe that a further 5-10% depreciation should be regarded as an extreme scenario when set aside the UK's high dependence on foreign capital," wrote analysts at JPMorgan in a note.

The flight from sterling benefited the safe-haven Japanese yen, with the pound down 1.5% to 137.34 yen.