By 12:30 BST the currency was priced at $1.2205 against its US counterpart, Reuters reports, having fallen below $1.22 in the afternoon session in New York yesterday.
Currency strategist for Credit Agricole Stuart Bennett said there is "major uncertainty" about what affect the move will have on financial markets.
"The German announcement came out of the blue, without warning," he was quoted by the news source as saying, adding traders do not know whether other countries will follow suit and introduce similar regulations.
Investors have moved towards the yen and the dollar as a result - both of which carry less risk than other currencies - and the announcement also caused sterling to dip in value.
At 10:25 BST, the pound was priced at $1.4281, having earlier retreated to a 14-month low of $1.4240.
Posted by Clive Arneil