[Dow Jones] Iceland's interest rates might have to rise to 16% to contain inflation, ISK has slumped around 15% against the dollar in 06 and over the last 5 years the current account has gone from balance to a deficit of 20% of GDP.
While Iceland is too small to have any direct impact on other markets, contagion could emerge if investors sense similar problems in other countries with large current account deficits, says ABN AMRO strategist Tim Drayson.
"I would stay clear of currencies and bonds in the following countries: Australia, Hungary, New Zealand, Spain, Turkey, the UK and the US." (NAK)
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