Eastern Europe fears spur rush to US bonds

The shift was prompted by a report from Moody's which warned that west European banks with east European subsidiaries were at risk of credit rating downgrades. Standard & Poor's, Moody's rival, followed later with a similar caution.

The euro fell 1.5 per cent to a two-month low of $1.2599 against the US dollar and also dropped sharply against the pound and the yen, while the Polish zloty hit a five-year low against the euro.

The general flight away from risky assets also hurt US stocks, but bonds rallied as investors put money into the relative safety of government debt.

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