Australia's Argument Against The US Dollar

Before we look at these forces, we should sketch out how exchange rate movements affect a nation 's trading relationships with other nations. A higher currency makes a country 's exports more expensive and imports cheaper in foreign markets; a lower currency makes a country 's exports cheaper and its imports more expensive in foreign markets. A higher exchange rate can be expected to lower the country 's balance of trade, while a lower exchange rate would increase it.

There are numerous reasons for the sudden decline in value of Australian currency, one of which is the renewed strength of the US dollar, due to the American economy’s acceleration through its recovery. However, there is the additional fact that the RBA has been cutting interest rates, resulting in Australia becoming a less attractive place for investors, as well as the continual impacts of deteriorating commodity prices

The Australian economy marks external stability as an important objective because it can influence other important aims such as economic growth, unemployment and inflation. External stability is the concept of sustaining a nation’s external accounts so that in the future, it is able to service its foreign liabilities and can avoid currency volatility. When looking at external stability, we must examine Australia’s balance of payments, which records all economic transactions between Australia and the rest of the world. Australia’s balance of payments has two components, which is the current account and the capital and financial account. The current account measures the receipts and payments for trade in goods and services, transfer payments and income flows, while the capital and financial account shows international borrowing, lending, purchasing and sales of assets.

The benchmark investment rate in Australia was last recorded at 2.25%. Investment Rate in Australia found the middle value of 5.13 percent from 1990 until 2015, arriving at an unequaled high of 17.50 percent in January of 1990. Inflation Rate in Australia averaged 5.21 percent from 1951 until 2014. Customer costs in Australia rose 1.7% during the time to the December quarter 2014, the slowest yearly pace in more than two years as petrol costs dove. Australian yearly inflation rate abated to 2.3% in the second from last quarter of 2014 from 3.0 % in the past period, determined by a fall in cost of electricity, after the removal of tax duty on carbon discharge beginning early July. An alternate key variable that impacts the business is the unemployment rate. While the unemployment is staying high it is normal that RBA will keep the investment rates and trade rates low. Unemployment Rate in Australia diminished to 6.30% in February of 2015 from 6.40% in January of 2015. Unemployment Rate in Australia found to be in between 6.91% from 1978 until

The decline in the CAD has been affected by what is happening to the nation’s levels of saving and investment. The level of Australia’s national

Without the low cost foreign company in the nation, domestic producers can change the price of the goods and services which means the consumers have to pay more in order to fullfill their needs and wants. (http://www.wisegeek.com/what-is-protectionism.htm) Globalisation have changed Australia's trade patterns since 1960s. Australia decline in the importance of rural exports, increasing in the importance of mining, services and manufacturing. For example,wool has fallen from 60% to 2.3% of exports in 2003 and 2004 due to the rising quantities of others export. Also, the amount of services exported by Australia has significantly rising such as personal travel services, education related, passenger transportation services, business, professional and technical services.

The factors that would cause a currency to depreciate is when there is a fall in the world price of a country's major export. This leads to a decline in export revenues and a fall in overseas demand for the exporting nation's currency and demand for a currency might fall if currency traders expect the exchange rate to depreciate causing them to sell on the market. The American dollar could potentially depreciate in value relative to the Australian

However, lower import costs offset negative consequences of export decline, and the total effect of the currency appreciation becomes muted.

a) A fall in the value of the Australian dollar (AUD) against the U.S. dollar (USD) benefit Billabong in two folds, strengthened price competitiveness and translation advantage. Firstly, the Americas segment accounts for about 50% of Billabong’s sales revenue in 2008 and 2009. (Appx.1) In case of depreciation of AUD against USD, the price of imported surfwear to the U.S. in terms of USD will decrease. The US importers demand more for Billabong’s products. The sales increases from the strengthened price competitiveness. Secondly, when Billabong received payment from the importers, it will translated back into AUD for use in Australia. As AUD depreciate, the receipt in USD can be translated into more AUD than before, bringing

Because Australia has a floating exchange rate, the currency’s value is left to be determined by the market forces of international demand and supply. There is no specific measure of exchange rate volatility. Economists instead refer to movements in Australia’s bilateral exchange rate or movements in Australia’s TWI to demonstrate exchange rate volatility. Since floating in 1983, Australia’s exchange rate has been remarkably volatile. This has been seen especially in the past six to seven years, where the Australian dollar has appreciated substantially against the US dollar, from record lows in August 2001 of US48 cents

Like the other currencies mentioned in the report, the Japanese Yen (¥) also adopts a floating exchange rate. As this is a short term forecast of the Australian Dollar (AUD) against the Japanese Yen (JPY), a chartist approach will be taken to analyse the movements of the two currencies. The technical method and the effects of the government are the topics that will be analysed for this short run forecast (Moffett et al, 2006 p.136). As of the 1st of September 2010 the Australian Dollar $1 = Y75.93.

For instance, Suppose Britain is the home country having the inflation rate of 2% and the foreign country which s Australia having an inflation of 8%.Then the foreign currency will have to depreciate by 6% (%∆e(foreign currency/domestic currency) = 6%) to help in offsetting the 6% fall in the real exchange rate caused by

You have just been transferred to Sydney and cover Australia and New Zealand on the sovereign research desk. Australia and New Zealand operate under a free trade agreement. No barriers to trade exist, and both currencies float. In this environment, an increase in expected inflation in New Zealand would most likely cause what effect?

In terms of the current account, it could also affect it as exports are more expensive, so we get a fall in exports. Imports are cheaper and so we see an increase in imports. This will cause a bigger deficit on the current account as spending on imports is greater than income from exports and having a huge deficit means the economy is weak . Riley G(2012) states that although in the short term it would improve living standards, in the long term it means that they must ‘ must rely on foreign direct investment or borrow money to make up the difference’

Firstly, devaluation of the currency leads to the boost of exports. As the exporters find it easier to sell the goods, it provides them a competitive advantage when compared to other manufacturers around the world. For understanding this concept better, we take the example of INR v/s $. We assume that 1$=60INR. An exporter from India sells a product for 10$ in the US market, which fetches