Sterling fell against a stronger dollar today, retreating from a three-year high touched earlier this week, as a rout in global bond markets sent yields flying and hurt the pound, while the Bank of England warned of inflation risks.
After rising above $1.42 for the first time in three years earlier this week, the pound fell to $1.3890 today, its lowest since February 18.
Against the euro, the pound fell 0.1% 87.03, after hitting a 10-day low of 87.30 pence in earlier trading.
Bank of England chief economist Andy Haldane warned today of a risk that inflation will prove difficult to keep under control as the economy recovers from the pandemic.
Analysts also attributed sterling's fall today to a sell-off in bond markets.
The pound has strengthened about 2% this year as traders expect Britain's speedy vaccine roll-out will help the economy rebound from its biggest contraction in 300 years.
Relief over a Brexit trade deal and pushed back expectations for negative interest rates from the Bank of England had also supported sterling.
Despite today's falls, sterling was still on track for its fifth consecutive month of gains against the greenback and the euro, with analysts maintaining a positive outlook on the currency.