Fear and uncertainty over Britain's upcoming EU referendum continued to loom over the City yesterday.

The pound has taken another dive - dropping below the $1.40 mark for the first time since March 2009.

At one point, sterling was as low as $1.3962, on concerns that the Out campaign will win on 23 June.

Yesterday morning's selloff means the pound has now lost four cents, or over 3%, since David Cameron secured his new settlement with the EU on Friday night.

Many analysts believe it could keep falling, perhaps as low as $1.30.

That would take the pound through its 2009 low ($1.35), to hit its lowest level since the sterling crisis in 1985, in the middle of Margaret Thatcher's premiership.

Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam, has predicted that the pound would slump to $1.20 if the British public choose to exit the EU.

He told Bloomberg that: "A vote for Brexit would hit sterling hard."

Jeremy Cook of FX firm World First also fears the pound will keep falling.

He told clients yesterday: "There are a lot of news pieces floating around this morning asking how low can the pound actually fall?

"How low can X go?" pieces are normally a sign of a bottom but you'd be a braver man than I to begin betting on an immediate bounce back for the pound.

There's a few reasons why Brexit would be bad for the pound:

1.      The uncertainty and disruption of an Out vote would hit growth. That would mean interest rates would remain at record lows for even longer, meaning a lower return for holding sterling.

2.     Some investors would sell UK assets and pull out of the country.These capital outflows would weaken the pound (as those investors would be exchanging sterling-denominated assets for another currency).

3.     Brexit might intensify concerns over Britain's current account deficit - the gap between what Britain buys and sells to the rest of the world. Currently, that deficit is financed by borrowing, and by selling assets to foreigners.