Sterling fell under $1.33 for the first time since December 2020 on Friday, as concerns mounted over a new Covid variant.

Fears it may be more difficult to combat this latest variant in South Africa with vaccines also led investors to reduce expectations for a rate hike by the Bank of England next month, piling further downward pressure on the currency, Reuters reports.

Over the past few weeks Sterling has been falling. Last month the Pound traded above $1.38, declining first of all by the Bank of England’s decision to not hike rates this month, followed by fears over decelerating economic momentum and mounting expectations of tighter monetary policy in the U.S., which has bolstered the greenback.

After dropping to a low of $1.3278, the Pound had rallied to $1.3315 early on Friday. Whereas against the Euro, the currency lost 0.6% to 84.65 pence, its weakest since 16 November.

"London is naturally highly exposed to new strains given its high volume of travellers, and markets will be on the lookout in the coming days for any evidence the new variant has already reached UK, with obvious downside risks for the Pound," according to ING analysts.

Governor of the Bank of England, Andrew Bailey stated on Thursday that central banks took risks when they sought to offer guidance on what may happen with interest rates during times of economic uncertainty: "Obviously, in a world which is much more uncertain as to whether things will happen, then it's much more hazardous to give that guidance," he said.

Some investors accused Bailey of conveying a wrong message about the chance of a Bank of England rate rise earlier in November.