The pound has slipped further from a 27-month low against the dollar reached earlier and slid to a new six-month low against the euro.
The embattled currency tumbled on Tuesday after the two contenders to be Britain's next prime minister promised to scrap the Irish backstop – a key part of Theresa May’s Brexit agreement – amplifying fears of a no-deal Brexit.
Stronger dollar pressured the exchange rate further on Wednesday, with the pound last trading at $1.2407. Sterling is nearing parity with the euro, with one pound now buying 1.1056 euro.
Since the start of 2016, the pound has lost 15 per cent of its value against a basket of currencies that includes the dollar and the euro.
Fears that Britain will crash out of the EU rose further on Tuesday after news emerged that Boris Johnson could send MPs home for up to two weeks in October if he becomes prime minister – a move that could prevent them stopping a no-deal Brexit.
Both Johnson and his rival Jeremy Hunt had already refused to rule out a no-deal Brexit.
The weaker exchange rate will be felt keenly by people heading off on summer holidays abroad. Analysis by Post Office Travel Money found that the pound has also declined against a number of other currencies used in popular destinations compared with this time last year, such as Thailand, Bali, Japan and Barbados. However, sterling has appreciated against currencies used in Turkey, Iceland and South Africa.
Additional reporting by agencies