The Australian Exchange Rate

economic literature on the relationship between interest rates and exchange rates in full, it will be useful to briefly discuss some of the important theories of exchange rate determination. There are many theories such as the theory of Purchasing Power Purchase Agreement (PPP), the Flexible Price Monetary Model (FPM), Sticky Price Monetary Model (SPM), Real Interest Rate Differential Model (RIRD), and Portfolio Balance Theory (PBT) of exchange rate determination. The PPP to maintain equality between…

Introduction The Australian Stock Exchange Group (ASX) has been serving for Australian market since 19th century; ASX is formed to regulate the share trading in Australia and it has been offering services in Australian dollar equities and derivative products . According to the 2015 ASX annual report, ASX has been supporting the infrastructure and stability of the Australian financial market across different corporate customers ; the functions are reviewing and monitoring the record and process of…

Although difficult to establish and measure, a close relationship exists between international trade and exchange rates. UNCTAD (2013) acknowledges that the relative valuations of currencies and their volatility often have important repercussions on international trade, the balance of payments and overall economic performance. This relationship has moved to the center stage of international trade debate following the 2008 financial crisis and the decision by several large countries to maintain undervalued…

Chapter 5 Exchange Rate Systems questions 1. How can you quantify currency risk in a floating exchange rate system? Answer: To characterize the risk of a currency position, you must try to characterize the conditional distribution of the future exchange rate changes. With floating exchange rates, historical information provides useful information about this distribution. For example, you can use data to measure the average historical dispersion (standard deviation or volatility)…

THE IMPACTS OF EXCHANGES RATE CHANGES ON TRADE BALANCE: THE CASE OF VIETNAM 1. Background of the study Among various subjects in the field of international trade and monetary policy, the relationship between real exchange rate and trade balance is one of the most popular topics, attracting extensive studies in last couple decades. Although a lot of efforts have been made, international trade economists have yet come up with a convergence point in theory to explain the moving direction of trade…

Differentiation Financial Hedging International Finance in Practice: Porsche Powers Profit with Currency Plays CASE APPLICATION: Exchange Risk Management at Merck Summary MINI CASE: Economic Exposure of Albion Computers PLC How to Measure Economic Exposure 1. Suppose the U.S. dollar substantially depreciates against the Japanese yen. The change in exchange rate a) Can have a significant economic consequences for U.S. firms. b) Can have a significant economic consequences for Japanese…

INTRODUCTION An exchange rate is the price at which one country's currency must pay in order to buy one unit of another county’s currency on the foreign exchange market. The concept of exchange rate mechanism may be explained as the technique employed by the governments in order to manage and control their respective currencies in the context of the other major currencies of the world. There are 5 exchange rate mechanisms established which each of it is meant to be followed by government regarding…

Exchange Rates Missing Two Graphs “For many years it has been believed that if countries import more than they export and so have a deficit on the current account of the balance of payments then their currencies will tend to fall in value. Yet over the last two years the dollar has been a strong currency even though USA has had a record current account deficit. How can this fact be explained? What does it tell us about the factors, which determine exchange rates? What policy decisions with…

Global Financing and Exchange Rate Mechanisms March 07, 2009 Global Financing and Exchange Rate Mechanisms Hard currencies are a currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the forex market (Investopedia, 2009). The forex market is the largest, most liquid market in the world…

n a fixed exchange rate regime, We use the term exchange rate to refer to nominal exchange rate not the real exchange rate. Few studies propose real exchange rate instead of nominal exchange rate. the government announces the value of its currency in terms of the anchor currency, and the central bank is committed to buy and sell its currency at the fixed rate. The Persian Gulf oil exporting countries follow a peg exchange rate regime; they do not have the proper institutions and central bank…