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However, a full economic recovery remains some way off.

Thirdquarter GDP in the United States has contracted by 0.3 per cent. Leading indicators such as consumer confidence, retail sales, and home prices remain very weak, and HSBC is forecasting that GDP will continue to shrink for the next two quarters as well.

With poor economic activity, fragile financial markets and reduced inflation pressures, helped by plummeting oil prices, interest rates in the US should continue heading downwards. Last week the Fed Funds target rate was cut to 1 per cent; we are expecting that it may fall all the way to an unprecedented 0 per cent by the middle of next year.

There is an apparent paradox in recent market movements - the US is the epicentre of the financial crisis, and economic growth there is weakening even further. And yet, the US dollar has strengthened significantly against most other currencies over the past few months, a trend that we had predicted in our September 2 column.

There are several reasons for this. First, the belated and uncoordinated response of European nations to the crisis has damaged the euro's credibility as an alternative to the US dollar.

Second, the US downturn had been expected and factored into markets for some time. Other major economies are facing similar challenges of recession and declining interest rates, which have only recently been recognised and priced.

Third, in volatile times, "cash is king", and the world's key safehaven investments remain US government bonds and Treasury bills.