The pound was hit this morning after Iain Duncan Smith dramatically quit the government on Friday.
Sterling fell by almost one cent against the US dollar, hitting a low of $1.4377.
It also fell against the euro, dropping 0.4 per cent to €1.2803.
"A bit of internal party bickering doesn’t normally impact Sterling but this time it has because of the possible implications for Brexit," said Jasper Lawler, market analyst at CMC Markets.
Duncan Smith resigned as work and pensions secretary on Friday due to what he termed a "deeply unfair" Budget.
In particular he was hitting out at disability cuts. However, the resignation has caused uproar in the Conservative party - not least because backbench MPs were planning on rebelling on the proposal anyway.
While Duncan Smith has denied claims that his resignation is related to his pro-Brexit position, his decision to leave the post has sparked battle cries from the Leave campaign.
"The resignation of Iain Duncan Smith, the work and pensions secretary, will simply add another layer of political risk to sterling’s prospects. "Brexit" continues to dominate conversations, and the most alarming comment I’ve heard so far was from a business student at a talk I gave last week: "I’d quite like the Uk to leave the EU, just to see what happened"," said Kit Jukckes, strategist at Societe Generale.
He added: "Young educated Londoners are natural in favour of Europe and if they’re torn between rebelling and not bothering to vote at all (older voters are much more likely to turn up at the ballot box, but also more likely to vote to leave the EU), that doesn’t bode well."