STERLING came under pressure on Monday as investors fretted about the prospects of a second Scottish independence referendum, which could compound Brexit uncertainties.
The pound was flat against the US dollar at 1.246 after falling as much as 0.5 per cent in morning trading.
Versus the euro, sterling was down 0.45 per cent at 1.173.
But the currency's decline kept the FTSE 100 afloat, closing 0.13 per cent or 9.3 points higher at 7,253 points.
Multinational stocks on the blue chip index tend to benefit when foreign currencies are stronger than the pound.
It comes amid reports that the UK Government is preparing for Scotland's First Minister Nicola Sturgeon to call another independence referendum around the same time that Prime Minister Theresa May triggers the formal Brexit process under Article 50 next month.
Michael Hewson, chief market analyst at CMC Markets UK, said: "While this uncertainty is nothing new it also overlooks the fact that any new Scottish referendum would have to be sanctioned by the UK Government, which isn't likely given this afternoon's reaction from Downing Street, while the existing Scottish Government would need to feel confident about winning it.
"Neither looks likely at this point."
Across Europe, the French Cac closed flat and the German Dax closed higher by 0.16 per cent.
In oil markets, Brent crude prices rose around 0.4 per cent to $56.16 per barrel (£45.05), as concerns about a global supply glut started to ease amid optimism over Opec production cuts.
In UK stocks, London Stock Exchange Group (LSE) shares fell 35p to 3,090p following news that its £21 billion mega-merger with the Germany's Deutsche Borse is unlikely to go ahead.
It comes after LSE refused to bow to renewed EU competition concerns, rejecting requests to offload its 60 per cent stake in the Italian trading platform MTS.
Bunzl shares rose 74p to 2,245p after reporting a 12 per cent jump in full-year pre-tax profit to £362.9 million, and announcing its first investment in Singapore through the acquisition of LSH.
Persimmon shares rose 5p to 2,030p after reporting a 23 per cent rise in annual pre-tax profits to £774.8 million and saying the new build market remains "confident."
Shares in Associated British Foods fell 24p to 2,587p after the group said margins will take a hit due to the weak pound, and that UK like-for-like sales at Primark in the six months to March are expected to rise two per cent, but come in flat across the board.
Insurers also fell after the Government announced changes to the Discount Rate calculation, which is expected to increase personal injury payments given to victims of medical negligence, car crashes and other incidents.
Direct Line Insurance Group plunged 26.1p to 338.5p, Admiral Group dropped 46p to 1,824p, Aviva shares fell 2p to 501.5p, and Standard Life shares fell 4.9p to 364.5p.
The biggest risers on the FTSE 100 were Bunzl up 74p to 2,245p, CRH up 77p to 2,744p, Unilever up 58p to 3,831p, and BHP Billiton up 17.5p to 1,325.5p.
The biggest fallers on the FTSE 100 were Direct Line Insurance down 26.1p to 338.5p, Fresnillo down 39p to 1,486p, Admiral Group down 46p to 1,824p, and Royal Bank of Scotland Group down 4.8p to 233.4p.
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