Reuters reports the euro fell to 82.1p against the pound in early trading - a low not reached since November 2008 - before recovering slightly to be valued at 82.32p at 08:40 BST.
Currency strategist for UBS Paul Robson was quoted by the news source as saying currency traders "are starting to sense that the UK is going from one of the worst bad sovereigns to one of the best bad sovereigns".
The new coalition government is due to reveal how it intends to cut the budget deficit later this month.
Analysts believe these measures could make the pound more attractive when compared to the euro, which has been suffering due to eurozone debt concerns.
Yesterday, the Bank of England opted to maintain the interest rate at a record low of 0.5 per cent for at least another month.
Posted by Clive Arneil