The value of pound sterling has fallen sharply after the UK general election produced a hung parliament.

Sterling fell overnight as the outcome of the election remained unclear, with further falls as markets opened in London.

Overall the currency is standing two per cent lower, at about $1.27, with markets worried about continued political uncertainty.

With no one party able to command a majority of MPs in the House of Commons, current prime minister Theresa May is expected to seek coalition partners to remain in power.

Against the euro, the pound was down 1.7 per cent at €1.14.

However, shares were higher with the benchmark FTSE 100 index up 0.9 per cent at 7,515.

A fall in the value of the pound tends to boost the FTSE 100.

This is because the majority of companies in the index have significant operations overseas, meaning a weaker pound sees profits earned abroad rise in value when converted to sterling.

Simon Phillips, retail director at No1 Currency, commented: “For now the pound’s prospects look much like Theresa May’s – clouded with doubt.

“Nearly a year on from the Brexit earthquake there’s no end in sight to sterling’s see-sawing instability.

“As long as the debate rages about whether Britain will end up with a hard or a soft Brexit, the volatility will continue.

“Against this backdrop, predicting the future course of the pound is a mug’s game, so anyone planning a foreign trip should watch exchange rates closely over coming days for any sign of improvement.

“The only certain thing is that more uncertainty lies ahead.”