Australia\'s Exchange Rate and the effects of glabal events
The purpose of this report is to document and bring to surface the burdening issue of the effect of global economic conditions on Australia's exchange rate. The beginning of the report details what the exchange rate is and how it can be defined. Following that is a look at the effects of major events on the exchange rate and the government's reaction to these events. The report will also analyse what effects occur from a falling country for Australia and some possible strategies to help combat these. The exchange rate can be defined as the price of a specific currency in terms of another currency. Exchanging currencies is essential for international transactions so countries can operate with their own currency. The method by which that price is determined depends on the particular exchange rate mechanism adopted in that country. Australia currently implements the ¥floating exchange rate system' where the exchange rate is determined by the market forces of supply and demand. This system means that the price of the Australian dollar is normally decided in the foreign exchange market by overseas currency buyers (demand) and local currency sellers (supply). This change to the floating
By using these policies they reduce aggregate demand and thereby raise the value of the exchange rate. The most concerning events that affect our exchange rate are listed below:"X A recession that occurs overseas impacts on our currency because it cuts demand for our exports. Another benefit in a long term perspective is the competitiveness it enhances for the tradable goods sector by making our goods and services cheaper. Fundamentally, there are three polices that the Australian government can do to try and alter the value of the exchange rate. This can cause imbalances and volatility for the Australian currency in conjunction to the troubled country"X Acts of war and terrorism have major effects as they cause falls in the economy and prevent countries trading with another because of the dangers of the unstable market. SUGGESTED STRATEGIES/ SOLUTIONSTo combat global economic conditions affecting our exchange rate there are a number of strategies that could be executed. One of the policies implemented is when The Reserve Bank enters the currency market as a buyer or seller of foreign exchange. One last strategy to consider is to lower interest rates. An additional strategy would be to take advantage of more of Australia's natural resources and expand our resource management. This report was instigated to make the cabinet aware of the behaviour of our currency and what effects it can cause when it becomes unstable. Anybody of interest is able to buy and sell currencies and what is and because exchange rates are constantly fluctuating so it is possible to gain significant income from the transactions. However the falling currency for Australia has got limited benefits as well. system occurred in 1983 while prior to that year Australia utilized the ¥fixed exchange rate system' where the exchange was officially set and controlled by the government. MAJOR EXTERNAL EVENTS THAT AFFECT THE EXCHANGE RATEThere are a considerable amount of major external events that impede upon our exchange rate. A lower interest rate restores confidence for foreign investors and this in turn increases the supply for the Australian currency.
Common topics in this essay:
EXCHANGE RATE,
STRATEGIES/ SOLUTIONS,
Reserve Bank,
EXCHANGE RATES,
CURRENCY Australia's,
Depreciation Australian,
,
SUMMARY FINDINGS,
exchange rate,
Australia Fundamentally,
GOVERNMENTS INTERVENTION,
australian dollar,
reserve bank,
economic growth,
exchange rates,
australian currency,
supply demand,
falling currency,
global economic conditions,
account deficit,
current account,
exchange rate defined,
australia's exchange rate,
major external events,
current account deficit,
|
Acceptance Essays
