The pound fell to a three-week low early on Monday (6 June), after a string of polls showed the "Leave" campaign was in the lead ahead of the European Union referendum later this month.
The UK currency tumbled in early trading, losing more than 1% against the US dollar and hitting a three-week low of $1.4355, before recouping some of the losses by mid-morning. Sterling was however trading 0.31% up against the euro, after losing ground against the European currency early this morning.
The decline followed news that a YouGov poll for ITV's Good Morning Britain put the "Leave" campaign in front on 45% and "Remain" on 41%, after an Observer/Opinium poll gave the pro-Brexit movement a three-point lead on Sunday.
"The Brexit debate reared its head once more over the weekend, as yet another poll pointed towards a lead for the 'Leave' campaign," said IG's market analyst Joshua Mahony.
"The sharp deterioration in sterling seen at the open of this week's trade was a sign of things to come, as volatility is expected to rise ahead of the referendum in 17 days' time."
A number of analysts have warned the pound could endure a drastic drop, possibly as low as $1.20, should Britain leave the EU on 23 June.
Meanwhile, on the back of the latest polls, sterling volatility hit the highest level since the financial crisis. One-month implied sterling volatility – the price of insuring against swings in the pound against the dollar – jumped to 21.9, the highest level recorded since February 2009. The index had not exceeded 15 in six years.
Odds on Britain leaving the 28-country bloc have shortened with most bookmakers and Betfair said chances of an exit now stand at 28% from 19% a week ago.