The British pound took a dive on Friday, tanking as much as 6 percent, as traders scrambled to assess the cause of the heavy selling.
The currency fell to $1.1819 in early Asian hours, hitting its lowest level since 1985—a year when it hit $1.0520 amid an acrimonious mining industry strike. The currency later recovered to hover at the $1.24 handle by the afternoon session of Asian trade.
Friday's fall was the most aggressive since results of the Brexit vote emerged on June 24, according to spread-betting firm IG.
Market speculation was rife that the decline was the result of a wrongly entered trade.
Because there was no news so far to justify the pound's wild swing, it could be the result of a fat finger, said Elias Haddad, senior currency strategist at Commonwealth Bank of Australia.
John Gorman, head of non-yen rates trading at Nomura Securities, said via email that there were two theories floating around.
"First, it was a fat finger or a trade entered mistakenly. The second possibility, which sounds more reasonable, is that there is a large barrier option that traded and that caused the selloff in light liquidity."
Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, echoed that view.
"It's a low liquidity sell-off. Typically when we see this, the reversal is violent but with fundamental support, the pound could find a new range between 1.22 and 1.25 per dollar," she said in e-mailed comments.