Sterling dived to a fresh record low against the euro, edging closer to parity, after the minutes of the Bank of England's December meeting intensified speculation that it would cut interest rates aggressively in January.

The pound sank 3.7 per cent to £0.9325 against the euro, its weakest level since the creation of the single currency in 1999.

Angus Campbell, head of sales at Capital Spreads, said: "The prospect of £1 equalling €1 became even more of a reality today. Currency trends are hard to turn round and momentum is truly against the UK."

Sterling also fell 2.4 per cent to Y135.29 against the yen and lost 0.3 per cent to $1.5520 against the dollar.

The Bank's minutes were noted by analysts to be particularly dove-ish, with members of the monetary policy committee voting unanimously for the historic interest rate cut of 1 percentage point that took the Bank's policy rate to 2 per cent, its lowest level since 1951.

Sterling was dragged lower by further gloom from the labour market, with data showing that UK unemployment in November recorded its largest monthly increase since 1991.

But Ian Stannard, of BNP Paribas, said he was sceptical of a continued decline of sterling versus the euro.

"The market has not yet fully taken on board the extent and severity of the likely slowdown in the eurozone," Mr Stannard warned.

The euro's strength was not across the board. The Norwegian krone rebounded against the single currency after Norway's central bank slashed rates by 1.75 percentage points to 3 per cent, far beyond expectations for a 100bp cut.

The krone rose 1.3 per cent against the euro to NKr9.4735, having touched a record low in the previous session of NKr9.6815.

Audrey Childe-Freeman, of Brown Brothers Harriman, said the magnitude of the rate cut took the market by surprise but said the krone's rally might be short-lived.

"The krone is losing its yield advantage by the month and this will leave it vulnerable in the near term, especially against a buoyant euro. Tuesday's record could be tested again soon."

The Swedish krona added 1.2 per cent against the euro to SKr11.0125 after the national debt office said it would buy SKr15bn against the euro in order to cut the cost of government debt and help prop up the currency.

Meanwhile, the dollar broke through the psychologically important Y88 level for the first time in 13½ years against the Japanese yen in further reaction to the US Federal Reserve's interest rate decision on Tuesday.

In a broad-based decline, the dollar fell 1.8 per cent to Y87.40 and plumbed a 10-week low against the euro, down 2.6 per cent at $1.4400. The dollar also sank 4.6 per cent against the Swiss franc to SFr1.0725.