The pound dropped below the crucial $1.40 mark amid fears that the UK would vote to leave the European Union. Sterling fell as much as 10% early on Friday, and is on track for its worst one-day fall in history. After trading at $1.3262, down nearly 9%, as of 5.27am BST, the currency recovered slightly to 1.3394 as of 6.05am BST.

The euro fell the most since it was introduced in 1999 while other currencies in Europe also took a hit, Bloomberg reported. The BBC reported that the UK had voted to leave the EU by 52% to 48% with 8 results left to be announced. The pound, which had earlier hit a 2016 high as polls suggested the Remain camp would come through in the referendum, fell to lows not seen since 1981. Just before 5am BST, as various agencies began calling the referendum in favour of Leave, the pound slipped further to trade at 1.3322.

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"It's extraordinary," said John Wraith, Head of UK Rates Strategy, UBS Investment Bank, Reuters reported. "'Shock' probably isn't too strong a word. People will come in this morning earlier than usual, so it's a skeleton staff right now. But shock was the first reaction. Now it's all hands on deck trying to deal with the volatility," he said.

Early Friday, the BBC, and other agencies, forecast that the UK had decided to leave the EU based on the analysis of pending undeclared counts.

"Markets are very nervy at the moment," Joe Rundle, head of trading at ETX Capital in London, told Reuters. "It's definitely tin hats time. If Leave wins there will be carnage for cable," he said, referring to the sterling/dollar exchange rate.

Elsewhere, the Nikkei 225 in Tokyo was trading down 6.73% while Hong Kong's Hang Seng was down 4.7% and the Shanghai Composite was down over 1%.

"It's scary, and I've never seen anything like it," James Butterfill, head of research and investments at ETF Securities, told Bloomberg. "We're going to see outflows from basically any kind of cyclical asset. A lot of people were caught out, and many investors will lose a lot of money."

Ahead of the EU referendum results, the pound was trading higher at $1.50, amid expectations that the Remain campaign would win. However, after votes in Sunderland and Newcastle swayed towards the Leave campaign, the sterling declined to $1.43. It further fell to $1.41 at about 2am.

The pound then dropped below 1.35, a 31-year low, Bloomberg reported. A few traders said that they had not witnessed such dramatic moves since the financial crisis of 2008.

Jeremy Cook, chief economist at World First, a UK-based foreign exchange company said, "These moves are concerning and bring back pretty painful memories of 2008.

"The pound didn't have this bad a day [against the dollar] in the global financial crisis and the moves by the bookies to price Leave as the favourite is killing the pound. News from Wales is the most concerning at the moment alongside the London turnout dynamics."

Analysts have warned that the drop was amplified by low trading volumes. Jeremy Stretch from CIBC said, "Volumes are very low and markets are relatively illiquid. Traders are very jittery, it's not just in sterling."

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