Australia's treasurer has warned that a "huge tsunami" will engulf global financial markets when China bows to international pressure and floats its currency.
"That will be a wild ride when that happens," Peter Costello told the Sydney Morning Herald in an interview published yesterday. "That will set off a huge tsunami that will go through world financial markets."
Costello has been treasurer for the past 11 years, presiding over an economic boom in Australia driven by China's hunger for resources and is heir-apparent to Prime Minister John Howard.
Expanding on his dire prediction in a radio interview yesterday, Costello said China should float its currency but warned of major volatility when that happens.
"The day they decide to float their currency you are going to get huge reversals of financial flows around the globe, which will affect all exchange rates, that's why I compared it to a tsunami," he said.
Costello denied that his warning was aimed at persuading Australia's central bank not to raise interest rates at its board meeting on Nov. 6, just weeks before general elections.
Meanwhile, the Australian dollar traded yesterday at its highest level against the US currency since it was floated 23 years ago, boosted by speculation interest rates would be hiked early next month. At 4:45pm the Australian dollar was at US$0.91, against US$0.89 a week ago.
Robert Rennie, head of Westpac's foreign exchange strategy, said attention appeared to have switched back to fundamentals, including the widening spread between Australian and US benchmark government bonds.
The yield spread between Australian and US two-year government bonds reached 2.9 percentage points this week -- the widest since May 2004.
"We're starting to move away from slavishly watching what US equities are doing and are likely to do and more toward the fundamentals," he said.
Rennie said Wednesday's release of third-quarter consumer price data had been a catalyst for the shift in focus. The data showed Australia's underlying inflation was at the top end of the 2 percent to 3 percent range the Reserve Bank of Australia (RBA) aims in to keep inflation within.
"I think we're we're going to see a significant possibility of the Fed cutting rates by 25 basis points next week to 4.5 percent, while the RBA is likely to raise rates next month and possibly the following month so that takes you to 7 percent," he said.
"That's a 250 basis points differential which has to be good news for the Aussie," he said.
FRIDAY, SATURDAY: While Typhoon Champi might weaken, officials warned about large waves, while some transport services and tourist spots have been affected Typhoon Champi is forecast to have the greatest effect on Taiwan tomorrow and on Saturday, with a sea warning issued late last night and a land warning expected afternoon today, the Central Weather Administration (CWA) said yesterday. The storm’s projected track has shifted slightly westward and it could begin moving away from Taiwan toward Japan’s Kyushu island on Saturday, with the warnings potentially lifted as early as Saturday afternoon, CWA forecaster Chang Cheng-chuan (張承傳) said. As of yesterday afternoon, Champi was about 910km east-southeast of Oluanpi (鵝鑾鼻), Taiwan proper’s southernmost point, CWA data showed. Its maximum sustained winds had weakened slightly to
The Coast Guard Administration (CGA) yesterday urged China not to exploit typhoons to assert jurisdiction over the Taiwan Strait. The CGA issued the remarks after it found that China was shadowing eight Japan Coast Guard ships that sheltered in Taiwan proper’s western waters due to Typhoon Champi. Eight Japan Coast Guard (JCG) vessels sailed southward along the Taiwan Strait median line from 6am on Thursday, reaching waters southwest of Penghu County’s Cimei Island (七美島), outside Taiwan’s contiguous zone, which extends 24 nautical miles (44.4km) from the territorial sea baseline, it said. As the Japanese ships prepared for the typhoon, they were followed by
STAY CAUTIOUS: Rain is expected to begin easing this afternoon, but a CWA forecaster said that if the storm stalls or loops on its approach, heavy winds are likely Typhoon Champi, which caused widespread damage and injuries, and prompted road closures and evacuations across Taiwan yesterday, is expected to continue to bring heavy rain this morning, with up to 900mm of rain forecast for mountainous areas of New Taipei City, Taoyuan and Yilan County, the Central Weather Administration (CWA) said yesterday. At one point a super typhoon and one of the strongest storms in the Pacific this year, Champi was packing gusts of about 191kph near its center as of 8:30pm, the CWA said. Taipei, New Taipei City, Keelung, Taoyuan, Hsinchu city and county, Taichung; and Yilan, Miaoli, Changhua, Nantou, Yunlin
TOTAL COVERAGE: Champi’s outer band is expected to blanket the entire nation, with the center coming closest tonight or tomorrow before leaving tomorrow evening School and work across most of the nation has been canceled today, as Typhoon Champi is expected to skirt the northeast edge of Taiwan proper. As of 9pm, all municipalities except for Kinmen County had announced cancelations. Taitung County last night announced closures on Green Island (綠島) and Orchid Island (Lanyu, 蘭嶼), but did not announce for the rest of the county until 6am today. Stock market settlements scheduled for today would be postponed to the next business day, the Taiwan Stock Exchange said. The announcements came after the Central Weather Administration (CWA) yesterday expanded its land warning for Champi to 19 regions
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