The pound fell to its lowest in nearly a year against the dollar on Monday, pressured by a spike in global risk appetite and further evidence that the UK housing market is heading for a sharp downturn.

The pound -- which has the highest interest rates in the Group of Seven industrialised nations -- has benefited from the carry trade where investors borrow low yielding currencies to fund purchases of higher yielding assets.

However fears that economic woes are spreading beyond the United States sent high-yielding currencies lower.

"Today's focus is on the outlook for risk appetite," said Paul Robson, currency strategist at RBS Global Banking.

"Risk aversion is widespread as the market thinks (the economic downturn) is not just a U.S. centric story and this has weighed on high yielding currencies like the pound.

Annual house price inflation in England and Wales fell to its lowest since December 2005, backing the view that the housing market is heading for a sharp downturn.

By 9:04 a.m. the pound fell 0.25 percent versus the dollar, to around $1.9480, its lowest level since March. It fell 1 percent versus the yen, to as low as 206.68, its lowest since May 2006.

A broadly weaker euro was down 0.5 percent at 74.36 pence.

Sterling has fallen from its November peak of over $2.11 to below $1.95 as a raft of negative economic news has increased expectations that the Bank of England is set to cut interest rates by as much as 100 basis points this year.

In further bleak news for the economy, public sector borrowing rose more than expected last month leading to the largest deficit for a month of December since records began, data showed.

Sorced by Reuters.