Sterling climbed back to $1.38 having hit a low of $1.32 while the FTSE 100 made it back to 6045 after dipping as low 5800. The FTSE 250 fared a touch worse but rose to 15,870 having been as low as 15,210.
Both indices and sterling were still significantly down on their pre-vote positions however.
Richard de Meo, managing director of currency specialists Foenix Partners, said the large fall when the leave vote's victory became clear was a product of investors badly misreading the chances of a Brexit.
“There was a massive adjustment because there had been an uncanny correlation between markets and bookmakers odds, “ he said. “The fall was a fear based reaction though rather than a real understanding of the situation in the market.”
De Meo noted that the quick fashion in which the pound recovered some of its lost ground suggests the worst is over in terms of weakening.
“We are seven cents off the lows and back to levels we saw in March,” he said. “The thing that was feared has now happened and it seems the initial slide has halted. Over the coming days it will continue to be very volatile though.”
“The move of the pound versus the dollar has been fascinating to watch,” said Alex Dryden, global market strategist at J.P. Morgan Asset Management. "We’ve witnessed the biggest single session swing in history with the pound having swung from its highest point since 2015 to its lowest point in 45 years in less than five hours. Many traders and investors probably feel like they’re choking on a fish bone right now. Today’s steep market moves are reminiscent of the eurozone and financial crisis, although with the financial crisis, you saw the fortunes of the UK and US take a downward step together. This is a London centric story which explains the bigger swings we are seeing.”
Delving into the details of the FTSE 100 movement reveals that the housebuilders have been responsible for a significant proportion of the fall. Persimmon, Barratt Developments, Berkeley Homes and Taylor Wimpey saw falls ranging from a remarkable 20% to 25%.