LONDON, March 15 Reuters  The British pound fell against the dollar but surged against a tumbling euro on Wednesday as markets fretted about the state of the European banking system as the fallout from the collapse of U.S. tech lender Silicon Valley Bank gathered pace.

Shares in Swiss lender Credit Suisse plummeted more than 30 at one stage after its largest investor said it could not provide more financial assistance to the bank.

The slide led the wider European banking index lower, triggering demand for the safehaven dollar and away from highbeta currencies such as the pound.

But worries of another European banking crisis were also weighing on the single currency.

The euro was 1 lower against the pound at 87.42 pence, after earlier dropping to 87.19 pence, its lowest level since Dec. 20, 2022.

The focus has shifted from a U.S. banking story to the Credit Suisse story and markets are assessing the ramifications of possible contagion, said Francesco Pesole, FX strategist at ING.

Markets are seeing the euro zone markets likely hit first and British markets to be slightly more shielded, so it makes sense that the euro is performing worse than the pound at this stage.

The pound was last down 0.7 against a broadly stronger dollar at 1.2070, having hit a onemonth high of 1.2203 on Tuesday.

The dollar index , which measures the currency against a basket of six others including the pound, was up 1.1 at 104.86.

Traders now see the Bank of England pausing rate hikes as…