The pound plunged to a record low against the US dollar after Chancellor Kwasi Kwarteng delivered his Mini-Budget.
The currency slipped to $1.0327 when Asian markets opened overnight, before recouping its losses to hit $1.08 on Monday afternoon.
The plunge meant that pound had reached its lowest ever level against the dollar since decimalisation in 1971.
It had already dropped to fresh 1985 lows on Friday after the Chancellor announced huge tax cuts in his Mini-Budget, which would be funded by adding tens of billions of pounds to the national debt.
Financial analysts say the sharp falls have been due to the Mini-Budget, combined with record-high inflation and fears of a new recession.
The pound has also been under pressure due to strength of the US dollar, partly due to the Fed rising interest rates.
Chris Weston, head of research at Pepperstone, said: "Sterling is getting absolutely hammered.
"Investors are searching out a response from the Bank of England. They're saying this is not sustainable, when you've got deteriorating growth and a twin deficit."
Mansoor Mohi-uddin, chief economist at Bank of Singapore, meanwhile likened the current movements in the pound to crises seen in less-developed economies, describing Kwarteng's problem to the Financial Times as a "struggle to reassert credibility".
The economic package has also been criticised after figures showed that the measures, which include abolishing the top rate of income tax for the highest earners, would primarily benefit the top earners while saving little for most people.
Asked at the weekend whether the falling pound and grim economic outlook made him nervous, Mr Kwarteng said: “We’ve got to have a much more front-footed approach to growth and that’s what my Friday statement was all about.
“I think that if we can get some of the reforms … if we get business back on its feet, we can get this country moving and we can grow our economy, and that’s what my focus is 100% about”.
The pound has also recorded a smaller fall against the Euro, which has itself fallen close to parity with the dollar recently as doubts grow over the impact of the fuel crisis in the months ahead.
Last week travel money experts warned British holidaymakers to to plan ahead in order to protect their cash, with those hoping to head stateside especially affected.
Jack Mitchell, Head of Travel Money at FairFX, said: “The pound/dollar exchange rate will be concerning for anyone planning upcoming trips to the US, as holidaymakers face rates we’ve not seen since the 1980s.
“Amid rising costs, inflation and ongoing economic uncertainty, rates may well remain at this level, and it will be a worrying time for anyone hoping to plan trips abroad. But there are steps you can take to avoid seeing your holiday budget cut further.
“Keeping a close eye on currency rates and patterns is always the first step, and if rates are looking more favourable, it could be worth considering locking them in on a prepaid currency card.
