From Fairfax:
The two or three per cent devaluation of the Chinese currency that shook the world’s financial markets is just the beginning of what could be a 15 or 20 per cent drop in the yuan in the coming two years, BT Investment Management’s head of fixed income Vimal Gor has told Livewire.
Gor said he had been “negative on the currency for a while” but that August’s devaluation had happened sooner than they’d anticipated: “It signals to us that [Chinese economic] growth is a lot worse than we’d originally anticipated”.
A steep drop in the yuan would have serious ramifications for other Asian countries, which “will have to devalue their currencies as well”.
“I think the biggest impact on the developed world like the US and Europe where they [will] see marked falls in import prices and therefore, again, it puts pressure on the central banks or governments to respond to slowing inflation rates or deflation.”
Gor describes the Australian economy as a “slow moving train wreck” where data grows a little weaker each quarter and that “at some point the RBA has to respond” to the deteriorating conditions.
Gor expects at least two more rate cuts, and “potentially a lot more”.
This gent needs some Parliamentary re-education, eh Captain Glenn? He is lacking confidence and needs to realise that everything is awesome.
Cue the RBA statement on monetary policy:
