- The afternoon dip was fueled by a Financial Times report which suggested a continued stalemate over the Irish border situation.
- The "Irish backstop" has been a major sticking point in negotiations between the British government and the European Union.
The pound fell on Friday afternoon as a series of different Brexit developments encouraged traders to press sell on the British currency.
Sterling started the session trading at 1.252 versus the U.S. dollar. It then rose to $1.2573 by midday London but sank to around $1.2471 just two hours afterwards.
The afternoon dip was fueled by a Financial Times report which suggested a continued stalemate over the Irish border situation. The "Irish backstop" has been a major sticking point in negotiations between the British government and the European Union.
The FT report said that U.K. Prime Minster Boris Johnson has told his colleagues that he doesn't expect to reach a full "legally operable" deal covering the border issue at a crucial EU leaders meeting on October 17-18.
This came as Britain's Brexit Secretary Stephen Barclay was striking an optimistic tone shortly after meeting with the EU's top negotiator Michel Barnier.
"There is a shared desire reflected in the meeting today to secure a deal," Barclay told reporters, according to Reuters.
"There is a clear message from (European Commission) President Juncker and from the prime minister that a deal is doable," he said.
That failed to impress Ireland's deputy prime minister Simon Coveney, who told the BBC on Friday that he rejected any suggestion that preventing a hard Irish border could be sorted at a later date.
"We have a commitment from the British government over and over and over again — in writing and verbally — that they would work with us to put the issue and the anxiety around the Irish border question to rest now," Mr Coveney said.
Sterling had risen in the previous session after EU Commission President Jean-Claude Juncker said he is confident a Brexit deal will get passed before the deadline.
"I think we can have a deal," Juncker said in an interview with Sky News. "I am doing everything to have a deal because I don't like the idea of a no-deal because I think this would have catastrophic consequences for at least one year."
The current Brexit deadline is still October 31 but the British Parliament has passed a law that forces Johnson to ask for another delay from the EU should he fail to pass a deal.
—CNBC's Maggie Fitzgerald contributed to this article.