The British pound fell 6 per cent against the US dollar in just two minutes to $1.1841 when currency markets in Asia opened today (October 7).
It has since recovered to trade at $1.24, although it is still down around 1.5 per cent.
According to several reports, the plunge in the pound could have been caused by a “rogue” automated algorithm which may have reacted to stories about the Brexit negotiations.
There has also been speculation about whether it is a “fat finger” trade, where a trader mistakenly puts in the wrong number when carrying out a trade.
The currency has been volatile since the UK voted to leave the EU in June but this week has seen the pound’s value slip further to reach a 31-year low, after prime minister Theresa May hinted the UK may be heading for a ‘hard’ Brexit.