STERLING fell to a near four-and-a-half week low against the US dollar on Friday, as reports of a Tory plot to topple Theresa May cast fresh doubt over the Prime Minister's future.
The UK currency slipped 0.5 per cent versus the greenback to 1.305, capping a tough week for the pound which started its descent from 1.339 on Monday.
Versus the euro, sterling was down 0.6 per cent at 1.112.
David Madden, a market analyst at CMC Markets UK, said: "GBP/USD is suffering, just like Theresa May after the Conservative Party conference. The chatter on the newswires is that Mrs May could be up against a leadership challenge."
It came after Welwyn Hatfield MP Grant Shapps was unmasked as a ringleader among a group of around 30 Conservative MPs pushing for a leadership election.
While it is just short of the 48 needed to force a contest under party rules, Mr Shapps has said there is a "broad spread" of opinion among Conservative MPs who believe they cannot carry on as they were.
"Whether the Prime Minister is realistically going to face challenge or not is up for debate, but as far as the markets are concerned it reeks of uncertainty," Mr Madden said.
But sterling weakness was a boon for the FTSE 100, which reached its highest level since early August.
London's blue chip index ended the day up 0.2 per cent or 14.88p at 7,522.87.
It outperformed its European peers, with the French Cac 40 falling 0.36 per cent while the German Dax dropped 0.09 per cent.
Brent crude prices tumbled 2.7 per cent to $53.39 as investors fretted over the impact of tropical storm Nate on oil operations in the Gulf of Mexico.
"It's a similar story to Harvey and Irma, in that the adverse weather could knock refineries out of commission," Mr Madden said.
"Already operations in that region are being wound down in preparation for the heavy rain and high winds," he added.
In UK stocks, easyJet was among the worst performers on the FTSE 100.
Shares in the budget airline dropped 21p to 1,263p despite saying that its full-year profits would come in at the top end of forecasts following a record quarter.
Investors instead focused on the fact that its range for pre-tax profit - between £405 million and £410m - is well below last year's £495m, and warnings that it would take a £100m hammering from the Brexit-induced collapse of the pound.
Business materials firm CRH fell 36p to 2,774p amid reports that Summit Materials had made a rival bid for US cement manufacturer Ash Grove Cement.
CRH had offered buy the firm in a deal worth $3.5 billion (£2.68 billion) last month, but the period set for gaining Ash Grove's shareholder approval has since been extended.
The biggest risers on the FTSE 100 were NMC Health up 116 at 2,838p, Mediclinic International up 22p to 686p, Direct Line Insurance up 8.6p to 364.3p, and Admiral Group up 42p at 1,853p.
The biggest fallers on the FTSE 100 were Centrica down 3p to 174.5p, EasyJet down 21p to 1,263p, Marks and Spencer Group down 5.4p to 348.7p and CRH down 36p to 2,774p.
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