Sterling plunged to a new 31-year low against the dollar on Tuesday as fears over a so-called "hard Brexit" intensified, with experts warning that the pound could reach parity with the euro next year.
The pound fell 0.8% against the greenback in afternoon trading, to 1.273 US dollars, its lowest level since 1985.
Sterling also fell 0.68% to fresh five-year lows against the euro at 1.137, its lowest since October 2011.
John Wraith, head of UK rates strategy at UBS, warned that the pound could suffer a fate similar to that during the financial crisis.
"When the global financial crisis entered its acute phase, sterling resumed its rapid decline, falling a further 20% by the end of 2008. Although different in its underlying causes, a similar pattern of decline, pause, and fresh falls may be unfolding now.
"We reiterate our forecasts for the end of 2017 of 1.20 dollars for GBP/USD, and 1.00 for EUR/GBP."
Investors have been spooked by a series of announcements at the Conservative Party conference, where Theresa May said the two-year process of negotiating Brexit under Article 50 of the EU treaties will start by the end of March, putting the UK on course for a "hard Brexit".
This would see Britain lose access to the European single market as part of plans to clamp down on immigration.
Kathleen Brooks, research director at Forex.com and City Index, said: "The Tory Party conference is turning into a sell for the pound, as foreign exchange traders get spooked by May's apparent sanguine attitude to leaving the single market, preferring to focus on immigration and UK sovereignty rather than the economic fallout of Brexit."
Ms Brooks also said Chancellor Philip Hammond's comments, in which he warned that Britain's economy is heading for a "rollercoaster" ride over the coming years, had compounded the sterling sell-off.
However, the further deterioration in the value of the pound pushed the FTSE 100 Index within sight of its all-time high after smashing through the 7,000 mark.
The FTSE 100 Index closed up 90.82 points to 7074.34 on Tuesday, just short of the record closing price of 7104, which was reached in April 2015.
The FTSE 250 closed higher by 0.87% or 158.5 points at 18342, having slipped from its highest ever level of 18441.7 points reached earlier in the session.
Foreign companies listed in London have seen their shares rocket by the pound's tumble as it boosts their earnings when they are translated back into sterling.