In June of 2011 it took about $1.10 to buy an Australian dollar. Today it takes about 87 cents.

In the game of competitive currency debasement that’s not low enough for Guy Debelle, a Reserve Bank of Australia official. Debelle says Markets Face ‘Violent’ Crash, Australian Dollar Too High

Reserve Bank assistant governor Guy Debelle has warned against a ‘violent’ market crash while reiterating the Australian dollar is overvalued.

Speaking at the Citi Annual Australian and New Zealand investment conference in Sydney, Dr Debelle said the Australian dollar was still too high despite falling by about six per cent against the US dollar in September.

“The Australian dollar has depreciated in recent weeks, but on a tradeweighted basis is only back to levels of earlier in the year,” he said.

Citing the 1994 global bond market crash as a “good example,” Dr Debelle said there were several reasons to suspect that the next sell-off, particularly in fixed income, “could be relatively violent when it comes”.

Dr Debelle said heightened tensions in the Middle East and Eastern Europe, uncertainty about US monetary policy and about the direction of Europe and Japan, and concern about the strength of the Chinese economy would normally be sufficient to push volatility measures much higher.

Mr Debelle said he struggled to explain investor complacency.”One thing which is certain is that the low volatility will not persist.”

Mike “Mish” Shedlock