The pound fell to 1.1016 euros, the lowest it has been since April 24.
Against the dollar, it fell to $1.6134, its weakest in almost three weeks.
Although the sterling is still stronger than it was at the beginning of the year, analysts say the drop is evidence that current levels of UK borrowing are unsustainable.
UNSUSTAINABLE
The Bank of England's Quarterly Bulletin comments on the exchange rate, saying that it is at least partially due to the large amount of overseas borrowing taking place in the UK.
"Since the mid-1990s, the United Kingdom has consistently run current account deficits averaging around two percent of GDP," the article says. "Provided foreign investors were content to build up claims on the future earnings of UK residents in the form of financial assets, such an imbalance of domestic expenditure over savings was sustainable."
The financial crisis changed all that, however, and "led overseas investors to reassess their willingness or ability to purchase sterling assets and thereby finance the UK trade deficit."
On Friday, official figures showed UK's public sector net borrowing totalled 16.1 billion pounds last month - the highest figure on record for August.
The government currently owes 804.8 billion pounds or 57.5 percent of Britain's GDP, 127 billion pounds more than last year.
Against the dollar, it fell to $1.6134, its weakest in almost three weeks.
Although the sterling is still stronger than it was at the beginning of the year, analysts say the drop is evidence that current levels of UK borrowing are unsustainable.
UNSUSTAINABLE
The Bank of England's Quarterly Bulletin comments on the exchange rate, saying that it is at least partially due to the large amount of overseas borrowing taking place in the UK.
"Since the mid-1990s, the United Kingdom has consistently run current account deficits averaging around two percent of GDP," the article says. "Provided foreign investors were content to build up claims on the future earnings of UK residents in the form of financial assets, such an imbalance of domestic expenditure over savings was sustainable."
The financial crisis changed all that, however, and "led overseas investors to reassess their willingness or ability to purchase sterling assets and thereby finance the UK trade deficit."
On Friday, official figures showed UK's public sector net borrowing totalled 16.1 billion pounds last month - the highest figure on record for August.
The government currently owes 804.8 billion pounds or 57.5 percent of Britain's GDP, 127 billion pounds more than last year.
