The Sterling has fallen to its lowest level against the dollar since the beginning of July after Theresa May (pictured) outlined the timetable for starting Brexit negotiations.
It also hit a three-year low against the euro before recovering some ground.
On Sunday, the prime minister said she would trigger Article 50, the clause needed to start the process, by the end of March 2017.
That means the UK is likely to leave the EU by mid-2019. In early morning trade, the pound was down 1% against the dollar at $1.2854 and also fell by about 1% against the euro to €1.1433.
The pound has since picked up some ground against both currencies.
Mrs May’s announcement had “unsurprisingly, been bad news for the pound”, said Connor Campbell, Spreadex financial analyst.
“Sterling has been spooked by May’s promise to trigger the dreaded Article 50 by the end of March 2017.
“Not only that, the PM, in a move to appease the more rabid members of the Tory party but one that is set to cause revolt from the backbenchers, has signalled that curbing immigration is the top Brexit priority even if it comes into conflict with Britain remaining in the single market,” he added.
“Combine all this volatility together and the pound has been left at its worst price since the start of July.”
Sterling fell to its lowest intraday level against the dollar since 6 July, when it hit $1.2797.
Meanwhile, the FTSE 100 rose by more than 1% in late morning trading.
“A slump in sterling made life easier for UK markets, with price action so far this morning seeing high-quality international firms receiving a receiving a flood of buyers,” said Chris Beauchamp, chief market analyst at online trader, IG.
The FTSE fell sharply in the immediate aftermath of the referendum, but has subsequently recovered and is up nearly 10%, because listed exporting firms have benefited from the fall in sterling.
After the pound fell sharply at first on Monday, it then recovered some ground after a closely watched survey of the manufacturing sector indicated it grew at the fastest pace for two years in September.
“Another rise in the UK’s manufacturing PMI helped sterling to recover some of its losses, and while the move this morning has garnered plenty of attention it is a pale imitation of the action seen in the immediate aftermath of the Brexit vote,” Mr Beauchamp added. (BBC)