Pound tumbles as UK govt plan fuels concern

The pound dropped to a record low against the yen and breached $1.40 for the first time since 2001 as the UK's second bank-bailout plan in three months raised concern the global financial crisis is deepening.

The British currency had its biggest drop against the euro in a month after the government of UK Prime Minister Gordon Brown said it will spend an extra 100 billion pounds ($142 billion) to support the nation's banks and increase its stake in Royal Bank of Scotland Group Plc. The euro weakened as a German survey showed investors remained pessimistic about the outlook for the European economy.

"Worries about the banking crisis are leading to more risk aversion," said Antje Praefcke, a currency strategist in Frankfurt at Commerzbank AG. "The market isn't convinced, for the moment at least, that there'll be a light at the end of the tunnel."