The pound has plunged against key economies after it was revealed that the Bank of England boss lost a vote for an increase in monetary stimulus.
Sterling fell to fresh multi-month lows against the euro and the dollar after minutes from the BoE showed governor Sir Mervyn King wanted an increase of quantitative easing (QE) to £400bn.
The notes showed that unexpectedly three out of the nine BoE policymakers voted for an increase in asset purchases under the bank's QE programme, which currently sits at £375bn.
However, they were outvoted by the six others who preferred to keep policy unchanged.
The pound slid to at least an 8-1/2-month low against the dollar, dropping 1.1 cents in a day and reaching $1.549.
Meanwhile the slide with the euro continued, with the pound dropping to 1.145 euros, down 1.15 cents in the day.
The FTSE 100 index peaked above 6409 after news of the MPC minutes was released and finished at 6395 - a five-year closing high as investors anticipated benefits from extra QE stimulus.
James Knightley, economist at ING bank, said it was "significant" that Sir Mervyn voted for more QE.
"Clearly, if the data disappoints, more QE will be on its way," Mr Knightley said.
The MPC meeting was held on February 6 and 7, with the governor being supported by BoE economist Paul Fisher and Professor David Miles.
The British economy has been stagnant for the past two years, and the central bank only sees sluggish future growth.
But concerns about inflation and how effective more buying of bonds or other assets would be have stayed the bank's hand.
However, the swing in the governor's views provided the sharpest divergence in views since June last year, when a split vote was followed the next month by a majority in favour of an extra £50bn of purchases.
"A case could ... be made for undertaking additional asset purchases at this meeting," the minutes said.
"The degree of slack in the economy, and the likely positive response of supply capacity to increased demand, meant that higher output growth would not necessarily lead to any material additional inflationary pressure."
More broadly, the MPC said it was willing to allow longer for inflation to fall to its target, and to consider measures to boost lending from sources other than banks.
Most economists have seen it as unlikely that the BoE would opt to try and pump yet more cash into the economy, due to persistently high inflation and doubts from King among others about further asset purchases.
The meeting was only the fourth time that the governor has been outvoted since he took office in 2003.
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