The pound has touched a three-year low against the dollar as MPs opposed to Prime Minister Boris Johnson prepare their bid to delay Brexit.
It fell below $1.20 to its lowest since October 2016 before recovering. Against the euro, it is worth less than €1.10.
Rebel Tories and Labour MPs are planning a bill to stop the UK leaving the EU on 31 October without a deal.
No 10 has threatened a snap general election on 14 October if MPs succeed in seizing control of Commons business.
The bill would force the prime minister to ask for Brexit to be delayed until 31 January, unless MPs had approved a new deal, or voted in favour of a no-deal exit, by 19 October.
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Under Mr Johnson, the government has toughened its stance on a no-deal Brexit, which it has said is “now a very real prospect”.
Excluding the so called “flash crash” in October 2016, when the pound briefly fell sharply to $1.15 against the dollar before rapidly rebounding, the pound has not traded regularly below $1.20 since 1985.
The pound was trading at about $1.50 against the dollar before the EU referendum in June 2016.