The dollar fell heavily again last night, reaching a new low of $2.06 to the pound and falling below 80 on the DXY dollar index. Wall Street also took a pounding as shareholders worried more about the housing??decline and the sub prime crisis.

Risky bonds are still look expensive compared to low risk bonds. No-one can??be sure how much "reappraisal of risk" there has to be – that’s just a smart new fashioned way of saying risky assets are probably too dear and have to fall. It all depends on how far the Fed goes in tightening the clamp on the market by increasing interest rates further, or by leaving them where they are for longer.

??Credit has been very easy for a long time. There are billlions of dollars of borrowings in all sorts of fancy and clever arrangements and funds which will need to fall in value if the squeeze goes on.

Whilst we find out how far this credit crunch will go many will be reluctant to maintain big holdings in bonds. Clearly large sums are being moved out of the dollar, as overseas governemnts and investors decide to spread their investments around a bit more. They too will not want to lose a packet on dollar bonds. The falling dollar will help US exporters. It is bad news for UK exporters to the US, and?? bad news for the tourist trade in the UK wanting?? more dolar tourists – as if the floods and the weather ??had not done enough damage already.