Sterling continued to tumble on currency markets on Tuesday as it buckled under investor concerns over the dismal state of the UK financial sector.

The 2.7 per cent drop in sterling on a trade-weighted basis came amid uncertainty about the terms of the government insurance for toxic assets held by banks and fears of a creeping nationalisation of the sector.

Analysts said sterling had been trading with strong correlation with UK bank stocks, which suffered fresh falls. The growing possibility that the Bank of England would soon create money to buy assets has intensified speculation that the value of sterling will be progressively eroded

FT.com / UK / Economy & Trade - Sterling continues to tumble

'This week, sterling has fallen 4.5 per cent against the euro, 5.8 per cent against the yen and 6.1 per cent against the dollar. The UK currency has retreated about 34 per cent against the dollar from highs in November 2007.'

The pound continues to fall. Discuss?