Sterling briefly dropped below $1.33 for the first time since December 2020 today as the currency found itself caught up in the dumping of riskier assets amid panic over a new Covid-19 variant described as the most concerning yet.

Concerns it might be harder to combat the variant in South Africa with vaccines also prompted investors to scale back their expectations for a Bank of England interest rate rise in December.

This added to downward pressure on the pound.

Sterling has been falling in recent weeks - in October it traded above $1.38 - sent lower first by disappointment the Bank of England did not raise rates this month.

More recently it was hit by worries over slowing economic momentum and growing expectations of tighter monetary policy in the US, which has boosted the dollar.

After falling to as low as $1.3278 this morning sterling recovered to stand at $1.3315 a little later.

Against the euro, it shed 0.6% to 84.65 pence - its weakest since November 16.

"London is naturally highly exposed to new strains given its high volume of travellers, and markets will be on the lookout in the coming days for any evidence the new variant has already reached UK, with obvious downside risks for the pound," said ING analysts.

Bank of England Governor Andrew Bailey said this week that central banks took risks when they sought to provide guidance on what is likely to happen with rates - an apparent pushback on his predecessor's preference for forward guidance.

Bailey was accused by some investors of sending a wrong signal about the likelihood of a Bank of England rate hike earlier this month.