Sterling came under renewed pressure today, dropping to a four and a half month low against the euro.
Traders are taking a cautious view at the start of talks between Britain and the European Union on their future relationship after Brexit.
Around 100 UK officials head to Brussels for the first round of talks with the EU's executive arm, the European Commission, which are due to last until Thursday.
Half a trillion euros worth of annual trade and close security ties are at stake in what are bound to be tense talks.
The EU wants to give Britain beneficial access to its single market of 450 million people in exchange for guarantees that London would prevent dumping.
But Prime Minister Boris Johnson has said he wants to move away from the EU and refuses to be bound by its rules or the jurisdiction of its top court - all necessary, in the EU's view, to ensure fair competition.
"It's essentially the same (Brexit) story that's been going on, but a new chapter," said David Madden, market analyst at CMC Markets in London.
"All you need is one negative comment from a government official. The fact that that's a possibility has dissuaded a large chunk of sterling buyers," he added.
The pound was 0.5% lower at $1.2761 today. Against the euro, it reached a four-and-half- month low of 86.83 pence.
The pound also reached four-and-a-half-month lows last week against both the dollar and the euro as fears of the spreading coronavirus prompted a selloff in global markets.
The Bank of England said it was working with Britain's finance ministry and international partners to make sure "all necessary steps are taken" to protect the banking system and the broader economy.
Signs the global impact of the coronavirus is starting to weigh on a post-election recovery in Britain's manufacturing came today as factories reported bigger delays in their supply chains.
The IHS Markit/CIPS purchasing managers' index (PMI) rose to 51.7 from the no-change level of 50 in January. That was its highest since April, but slightly weaker than February's "flash" reading of 51.9.
Elsewhere, there were still signs of strength in the UK economy.
British lenders approved the highest number of mortgages for house purchase in nearly four years in January, Bank of England figures showed today, confirming a pick-up in consumer demand at the start of 2020.