Pound hits 8 1/2-month low vs dollar

Worries about how euro zone states including Greece and Portugal will service their debts have prompted investors to cut their exposure to risky assets, including those denominated in sterling, which has been battered in recent weeks.

Taking losses into a fourth successive day, the pound fell to $1.5535 in early London trade, its weakest since late May 2009.

Analysts said sterling may come under more selling pressure as broad concerns about sovereign debt highlight Britain's own grim fiscal position and crank up risk aversion.

"We could see $1.55 if the selling continues. That's going to depend on the general attitude on risk," said Geraldine Concagh, economist at AIB Group Treasury in Dublin.

"The sovereign issue is going to be the key thing this week."

By 8:35 a.m., sterling traded 0.2 percent lower on the day at $1.5620.

The pound trimmed some losses, but stayed under selling pressure after it fell more than 2 percent against the dollar last week, its worst weekly performance since late September 2009.

The pound suffered across the board, pushing the euro up 0.4 percent to 87.86 pence, its strongest in two weeks.

Sterling was slightly lower on the day against the yen at 139.55 yen, staying close to a 10-month low of 138.20 yen hit late last week.