Crash and carry

The most startling aspect of the USD's decline over the past year has been its occurrence against a backdrop of fairly limited re-pricing of risk across other G-10 currencies, and extreme correction in risk premiums in other financial asset classes. Swap spreads indicate that the subprime-driven credit crunch is a global phenomenon - the longer it lasts, the greater the impact will be on global asset valuations, including previously sheltered markets such as Asia and the emerging markets.

Yet

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