The pound has come under renewed selling pressure, sending the currency lower against sterling, the deutschmark and the dollar, and fuelling concerns of further losses in the days ahead.

As the markets got back to business after the Christmas holidays, the pound came under early selling pressure, with dealers suggesting that up to £100 million of the Irish currency was sold yesterday.

While economists had expected some onslaught, some were taken aback by the scale of the impact on the currency, with heavy selling sending the pound down to new eight-year-lows of 85p against sterling. The pound was also forced lower against the deutschmark, dropping by more than a pfennig to close at DM 2.5447 and lost two cents against the dollar to trade at $1.3988, its lowest levels in some years.

Most of the selling pressure came from the corporate sector as it settled back to business. But there was also some sizeable selling by investors in London, taking profits while the pound is weak.

The renewed speculation is largely based on the market view that the Government will not revalue the pound in the run-up to European Monetary Union. With the Irish currency now seen likely to join the single currency at DM2.41 the market is expected to force it down to these levels.

Bank of Ireland economist Mr Jim Power believes the pound will remain under pressure throughout the week, with selling pressures forcing it lower against the major currencies. "A rate of DM2.52 could be within target over the next few days, while the pound could drop as low as 83p against sterling," Mr Power said.

Dr Dan McLaughlin, of Riada Stockbrokers, suggests the pound may yet find some support that would stem any further significant losses, but will remain vulnerable. "Over the next few days sterling could come back down, allowing the pound to steady up a bit, with the Irish currency getting some support from profit taking if nothing else. But the problem is that once the momentum gets going, the pound could move lower pretty quickly."

The pound's problems have been compounded particularly by the strength of sterling and the dollar which have been boosted by the turmoil in the Far East. The dollar has been the main beneficiary of the uncertainties, being seen as a safe haven currency.

The dollar was pushed sharply ahead on the international markets by the continuing weakness of Asian currencies and continuing doubts about Asian economies.

Sterling was, in turn, pulled up by the dollar but analysts say it has only limited upside potential because of the anticipated slowdown of UK economic growth. That trend was confirmed by the decline of the UK manufacturing purchasing manager's index in December.