The last time the dollar was this low against the pound, Americans had just discovered who shot J.R. and the euro was still a gleam in the eye of Jacques Delors. This week, the dollar reached a 26-year low against the pound and slid to new lows against the euro. Some investors are worried; most economists remain calm. Both are right.

The dollar slide came amid another week of negative market movements, principally driven by more bad news from the US subprime housing market. This sparked a flight from risky assets in favour of US Treasury bills and assets abroad. The results were a further currency adjustment and a widening of the returns paid for risky bonds compared with the safer variety issued by governments.