The pound ended down again as the UK faced isolation over a mutant coronavirus strain, although hopes of progress in Brexit trade talks helped take some pressure off the currency.
At the close of markets, sterling had fallen 0.76% against the dollar to $1.336 and 0.26% against the euro to €1.097.
However, this was still far from the 10-day low of $1.319 touched on Monday.
The lifting of the French travel ban, which has caused transport chaos in Kent, came after the end of trading.
Jane Foley, head of FX strategy at Rabobank, said the pound found some support from reports the UK and Brussels “could be closing in on a compromise regarding fisheries” – one of the sticking points in the Brexit negotiations.
European Union chief negotiator Michel Barnier said the bloc is giving a “final push” to reach a deal on future trading ties with Britain.
Meanwhile, the stock markets that had also been spooked at the start of the week, fared better seeing a rebound as investor jitters faded.
The London-based FTSE 100 index closed up 36.84 points, or 0.6%, at 6,453.16, having previously lost 112.86 points, or 1.7%, on Monday.
The FTSE 250, which is mainly made up of UK-focused businesses, had an even better day, closing up 258.61 points, or 1.3%, at 19,950.72.
In Paris, the CAC 40 ended up 1.4%, while the DAX 30 in Frankfurt rose 1.3%.
Josh Mahony, market analyst at IG Group, said: “UK markets are in recovery mode today, with yesterday’s sharp slump in domestically-focused assets being partially reversed over the course of the day.
“Volatility seems to be a foregone conclusion as we head towards the year-end, with the COVID-led economic isolation of the UK serving to provide a heavy dose of reality of the kind of disruption that could come if negotiators fail to agree a deal by year-end.
“However, Brexit failure is not a certainty, and market sentiment over the coming week is going to be heavily dictated by the ability to find compromise on the remaining issues.”
In company news, shareholders in DFS Furniture welcomed the news that online sales soared by more than three-quarters over the 24 weeks to 13 December to help overall sales rise 19% compared with last year – offsetting the falls from closures due to COVID-19 restrictions.
Shares closed up 22p, or 10.5%, at 232p.
The company will still buy 22 aircraft as previously planned. Shares closed up 17.8p at 775p.
Welcome Break owner Applegreen said it will be taken private after a €718m (£654m) takeover deal by a consortium involving its founders and private equity giant Blackstone.