Pound dips to four-month euro low

The pound was last at such euro lows back in May

The pound has fallen to a four-month low against the euro because of fresh concerns about the extent of the UK's public sector debt levels.

One euro rose as high as 0.9057 pence in Friday trading, the single currency's highest position since May.

At the same time, the pound was also down against the dollar, weakening to $1.6232, its lowest point in two weeks.

The pound's falls came as official figures showed UK's public sector net borrowing totalled £16.1bn last month.

This was the highest figure on record for August.

The government's overall debt now stands at £804.8bn, or 57.5% of GDP, which is an increase of £172bn in the past year.

Analysts said the pound was also weakened by speculation that the Financial Services Authority has set Lloyds Banking Group a strict criteria to leave the government's insurance scheme for toxic banking assets.

According to reports, Lloyds has been set a task of raising more than £20bn to strengthen its balance sheet if it wants to leave the Government Asset Protection Scheme (GAPS).

Such news has hurt the pound as it suggests that it will take longer for the UK banking sector to return to normal.