"As stock markets plummet, somewhat perversely given all the focus on the debt ceiling debate, the US dollar has strengthened as it remains the most liquid and most traded currency globally.
"As we saw in 2008 when Lehman's collapsed, it was the most sought after when times got really tough.
"It seems we are now experiencing an after-shock from the credit crisis in 2007/2008 as investor confidence remains sensitive to the global downside risks. In the currency markets the risk-on tap has now been fully turned off and the risk-off tap is in full flow. This is reflected in the recent weakness in the commodity currencies and investors are clawing for the safe havens of the Swiss franc and the Japanese yen. This has resulted in the central banks of Switzerland and Japan having to intervene to curb the rise of their currencies; however with limited options out there, it's going to take a lot of firing power to buck the trend.
"Looking closer to home and at Sterling, yields on gilts are at record a low, which reflects investor's confidence that the Government's approach to reducing the debt is the right thing to do."
