LONDON, Jan 13 Reuters The British pound extended its recent drop against the dollar and the euro on Monday driven by investor concerns about Britain39;s fiscal sustainability as gilt yields rose for a sixth straight day.

Sterling fell as much as 0.7 against the dollar to 1.2103, its lowest level since November 2023. It was last down 0.6 at 1.2125.

Against the euro , the pound was down 0.2 at 84.10 pence.

The pound has been in the crosshairs of global currency traders with British markets hit by surging global bond yields, which most have said originated from the United States due to concerns about rising inflation and lower chances of rate cuts from the Federal Reserve.

Strong U.S. labour market data released on Friday added momentum to global bond yields, with money markets no longer fully pricing in any rate cut from the Fed this year.

While higher yields often support the currency, in Britain analysts expect the government may have to rein in spending or raise taxes to meet its fiscal rules, potentially weighing on future growth.

Clearly something is coming to a head and it39;s not because of anything the UK has done over the last two weeks, it39;s because of the sensitivity of the UK39;s fiscal dynamics to rates and inflation, said Dominic Bunning, head of G10 FX strategy at Nomura.

The question for me is if yields start to stabilise, is that enough of a respite that this selloff starts to slow or takes a bit of a breather?

Britain39;s 10year gilt yield was…