Risk aversion favours the dollar
The seizing up of the inter-bank money markets around the world this month shows how risk aversion, starting from the weakness of the US housing market and the souring of subprime mortgages, has become acute enough to cause banks globally to fear dealing with each other.
In many ways, this summer's events are reminiscent of 1998. Though the world economy – outside emerging markets – was robust at the time, financial markets were in turmoil. The default by Russia on local government bonds caused
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