Australian Exchange Price

“What things affect the demand and provide of Australian dollars in the foreign exchange markets? Distinguish involving the probable causes and effects of a currency depreciation and a currency appreciation on the Australian economy. What forces have come into play, if any, in the previous four months that have affected the value of the Australian dollar?”

Exchange Rate: “The rate at which a single unit of domestic currency is exchanged for a provided amount of foreign currency”

A Brief HISTORY OF THE AUSTRALIAN DOLLAR

Till 1971, the Australian dollar (AUD) was “pegged” to the British pound. This meant that the AUD rose or fell in line with the pound. In 1971, the AUD became pegged to the US dollar alternatively. These currencies have been fixed currencies, which meant that the Australian currency would only change value when a major world currency also changed. This method lasted only till 1974 when the AUD became pegged to a trade-weighted selection of other currencies. This was nevertheless a fixed currency. In 1976 this choice of currencies became moveable. Small shifts had been in a position to take spot when required. In 1983 the AUD became a floating currency. This suggests that the worth of the dollar is determined by provide and demand. Initially, the Reserve Bank of Australia was not intended to intervene in the marketplace nevertheless due to the fact then it has been deemed essential for intervention to take location, typically to prop up the cost.

Factors AFFECTING Provide AND DEMAND OF AUSTRALIAN DOLLARS

With a floating exchange rate, such as Australia’s, provide and demand aspects largely establish the dollar’s equilibrium value. The exchange rate is sensitive to adjustments in each demand and provide, which can cause modifications in the equilibrium exchange rate. A further aspect, which can impact the supply and demand of Australian dollars, is intervention in the marketplace by the Reserve Bank of Australia.

DEMAND

The demand for Australia’s currency in the foreign exchange market place (Forex) is a derived demand. It is derived from the demand for a country’s exports of goods and services and its assets.

In easy terms, men and women who may possibly have a demand for the Australian dollar could consist of:

  • Foreigners wanting to purchase Australian exports
  • International tourists visiting Australia
  • International investors wishing to buy Australian shares or property
  • International firms setting up branches or expanding in Australia
  • Speculators and investors who consider the worth of the Australian dollar will rise in hope of generating a profit.

    The demand for the Australian dollar will be impacted by a…

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