With the latest polls suggesting the Tories will not win a Commons majority, experts warned of a full-scale economic crisis if the general election fails to deliver a clear result.

Other factors weighing on sterling included insurance giant Prudential’s £23.5bn mega-deal for AIG’s Asian business – there was speculation there would be heavy selling of pounds to buy the greenback to complete the deal.

Analysts also noted the potential loss of Britain’s cherished triple-A credit rating, which makes it cheaper and easier for the government to raise cash in the money markets, is also acting as a drag on the currency.

Against this background Shadow Business Secretary Kenneth Clarke launched a searing attack on Gordon Brown’s economic record, warning that Britain faces ruin unless it changes course. Ahead of a speech in the City, Mr Clarke, who as the last Conservative Chancellor bequeathed a golden economic legacy to Mr Brown in 1997, says: ‘The need for a credible plan to get down the deficit and restore the budget to balance has never been so urgent in my lifetime.’

At more than 12% of national income, Britain’s deficit is now on a par with that of Greece which has been plunged into a deep financial crisis and social unrest.

As polls show the gap between the Tories and Labour narrowing dramatically, many are warning that a hung Parliament – Britain’s first since the 1970s – could trigger turmoil.

Sterling has lost nearly ten cents against the dollar in little more than a week – hitting holidaymakers in the pocket, putting upward pressure on petrol prices and adding to import costs for businesses.