The pound was a shade lower at $1.2515 following an overnight loss of 0.5 percent.
With economic data also showing the United Kingdom economy struggling to gain traction, heaping more pressure on the Bank of England to ease monetary policy, investors took to the currency derivatives and futures markets to bet on more weakness.
Johnson and his rival Jeremy Hunt have vied with each other to show party members their willingness for a "hard" Brexit.
The pound was taking another hiding with the possibility of a no-deal Brexit growing ever more likely as the two contenders to become prime minister slug it out by trying to take increasingly tough lines with the EU.
The backstop, one of Brussels' principal demands in Brexit negotiations, is created to prevent the return of a hard border between EU-member Ireland and British province Northern Ireland.
"The pound has come under intense selling pressure since Prime Minister May withdrew from her party leadership position, leaving markets with increased concern that the United Kingdom may be heading towards a harder Brexit", said strategists including global head of currency strategy Hans Redeker. According to Refinitiv data, market participants own more than $800 million in sterling "put" options with a strike of $1.20 expiring July 26, making this the next key level to watch for. The Bank of England also said in November that the pound could fall to below parity with the dollar under a no-deal scenario, an analysis that was decried as too negative at the time.
Despite some signs of weakness, the latest data from the Office for National Statistics showed annual average earnings growth at 3.6% in the three months to May - comfortably exceeding the increase in the cost of living.
Growth in employment slowed to a lower-than-forecast 28,000, the weakest increase since the three months to August 2018 as vacancies slumped to the lowest level in more than a year.
Tej Parikh, chief economist at the Institute of Directors, the employer's group, said: "With wage growth outpacing inflation, individuals have seen their pay packets go further, yet with unemployment so low, salaries could be even higher".
The current theme of negativity surrounding Sterling is wide-reaching, with the British Pound Turkish Lira exchange rate (GBP/TRY) finding itself under pressure yesterday and falling by as much as 1.5%. "But I am anxious that volatility is starting from a very low base and hedging flows will be picking up further", Rochester told clients.
The drop in the value of sterling comes amid fears over a no-deal Brexit, after the Conservative leadership candidates failed to address concerns about the uncertain economic climate.
The ONS said total pay - which includes bonuses - was 3.4% higher in the three months to May than in the same period a year earlier.
Only 20% of respondents surveyed by Bank of America Merrill Lynch expect the U.K.to leave the European Union on or before the current October deadline and about 60% put the probability of a no-deal Brexit below 40%.
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