Why are pounds sterling called "knicker"?

I asked the price of an article the other day, and was told that it cost 120 knicker. This is a slang term for pounds sterling that always appears in the singular. I have failed find any reason why pounds should be referred to thus (it might also be nicker and I am imagining the silent k).

Is it some rhyming slang I am missing the back half of, or is there some other etymology?

Solution 1:

The OED says it's origin is unknown, but suggests it could be originally horse racing slang and the first quotation from 1871 is in this context.

One of the other meanings of nicker is a neigh or neighing sound, originally Scottish, and imitative of horses or donkeys, and is from at least the 17th century. It also meant a laugh or a snicker.

Solution 2:

From this reference:

knicker: distortion of 'nicker', meaning £1. See entry under 'nicker'. See also 'pair of knickers'.

And

nicker - a pound (£1). Not pluralised for a number of pounds, eg., 'It cost me twenty nicker..' From the early 1900s, London slang, precise origin unknown. Possibly connected to the use of nickel in the minting of coins, and to the American slang use of nickel to mean a $5 dollar note, which at the late 1800s was valued not far from a pound. In the US a nickel is more commonly a five cent coin. A nicker bit is a one pound coin, and London cockney rhyming slang uses the expression 'nicker bits' to describe a case of diarrhea.

And of course ;-)

pair of nickers/pair of knickers/pair o'nickers - two pounds (£2), an irresistible pun.