THE pound fell to its lowest level against the US dollar since early September on Thursday amid political uncertainty and concerns over the health of the UK economy.
Sterling was trading lower by 0.8 per cent at 1.312 versus the greenback, marking its lowest point since September 7.
The currency's losses were more subdued against the euro, down 0.4 per cent at 1.121.
It gave a boost to the FTSE 100, which ended the day up 0.5 per cent or 40.41 points at 7507.99, as many of its listed multinational stocks tend to benefit when foreign currencies are stronger.
Neil Wilson, a senior market analyst at ETX Capital, said: "Sterling's had a rough ride today as political uncertainty and signs of weakness in the economy weighed on sentiment."
Sterling's fall was first prompted by poor car sales figures, which showed a 9.3 per cent drop compared with the same month last year and marked the sixth consecutive month of declines.
It was also hit by rumours that Prime Minister Theresa May could step down, but Mr Wilson said it seems "unfair to write her political obituary just yet".
Mr Wilson said: "In the absence of any viable candidates and Labour knocking on the door making an election unpalatable to the Tory party, she is likely to soldier on.
"Worries about the economy - and therefore the Bank of England's willingness to raise rates - are of equal concern and this is perhaps why sterling is back to where it was before the September 14 MPC (Monetary Policy Committee) hawkishness."
Ratings agency S&P has suggested that the UK economy is not ready for a series of interest rate hikes by the Bank of England.
It also said that recent statements by Governor Mark Carney were "primarily" aimed at propping up the pound and cutting down inflation pressures.
Across Europe, the French Cac 40 rose 0.3 per cent while the German Dax closed relatively flat.
Brent crude prices jumped 2.5 per cent to $57.14 per barrel after Russian and Saudi Arabian officials suggested they would be open to an agreement that could see oil production caps extended into 2018.
In UK stocks, Merlin rose to the top of the FTSE 100, up 15.4p at 463.8p after sources said the Alton Towers owner is eyeing a potential deal to buy part of SeaWorld to help accelerate its global expansion.
Aviva dropped 8.6p to 490.3p amid news that the financial services firm was buying a majority stake in Wealthify, a low-cost automated investment service.
Education group Pearson edged higher by 2.5p to 616p after successfully offloading its 22 per cent stake in its publishing unit Penguin Random House to Germany's Bertelsmann for around $1 billion (£761 million).
Revolution Bars Group fell 3.5p to 207p. Nightclub operator Deltic proposed an all-paper merger with the company, which would see Revolution own 65 per cent of the combined business and Deltic the remaining 35 per cent.
DFS tumbled 9.5p to 215.5p after the sofa chain said it booked a 22.3 per cent fall in annual pre-tax profits, having been hit by Britain's faltering economy, falling consumer confidence and the Brexit-induced collapse in the pound.
The biggest risers on the FTSE 100 were Merlin Entertainment up 15.4p at 463.8p, Anglo American up 43.5p at 1,473.5p, Glencore up 10.9p at 370.3p, and Antofagasta up 23p at 996.5p.
The biggest fallers on the FTSE 100 were Aviva down 8.6p to 490.3p, Next down 75p at 5,170p, WPP down 19p at 1,384p, and Smurfit Kappa Group down 32p at 2,350p.
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