The Australian Exchange Rate

With a floating exchange rate, such as Australia's, supply and demand factors largely determine the dollar's equilibrium price. The exchange rate is sensitive to changes in both demand and supply, which can cause changes in the equilibrium exchange rate. Another factor, which can affect the supply and demand of Australian dollars, is intervention in the market by the Reserve Bank of Australia.

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

Although Australia remains geographically isolated from the world, international trade still remains a main factor that allows Australia’s economy to prosper. Australia’s long history of trade has created tight links and connections with other nations. Being a member of many worldwide organisations, Australia has produced many free trade agreements with countries around the world. However, recently Australia has seen a change in the composition and direction of its trade and has developed a strong trade link with the Asia-Pacific Region.

Australia has also experienced a rising terms of trade to 130.0 in late 2011 due to the commodities boom as a result of the industrialization of the BRICs, whereby Australia has experienced high export and national income, but has resulted in less competitiveness in other sectors due to the high AUD, causing the ‘Dutch disease’ whereby non-commodity sectors lose competitiveness. Similarly is can be seen in its narrow export base whereby in 2012-13 one third of export revenue came from coal and iron ore ($96 billion from 300 billion), furthermore 57% of Australian export revenue is made up of mineral and energy exports, whereby Australian growth has been largely fuelled by commodity exports and mining boom.

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.

2011). A depreciating Australian currency is potentially inflationary, the depreciation of the Australian dollar lead to high Australian inflation rates, it cause a loss of export markets and reduce demand for Australian currencies. In this way, Australia’s inflation rates and costs are higher than its overseas competitors, at the same time domestic goods in Australia would be more expensive (Edge, K 2009). As well as inflationary pressures in Australia will increase, as imports would now be more expensive. This may increase pressure on the RBA to raise interest rates to defend its inflation target. With the result that Australian multinational corporations would cause it lost their overseas’ markets and customers, profit which from overseas would be decline and also pay for more interest

When the supply of AUD is more in the market, the value AUD is decreasing as there is not sufficient export done during the year. As the major importer is china, and the economy of that country does not goes well, that will have direct impact on the Australian economy. The exports will decrease dramatically and there will be less inflow of AUD in the market. Likewise, when Australia imports more of goods, there will be more outflow of AUD to other counties and it will create less supply of AUD in the market and value of AUD will increase.

Australia imports generously a larger number of merchandise and administrations from the USA than it fares to it. As shown in source B1, exports to the US are 15,533 million AUD, compared to the 39,181 million AUD that is imported from America. Australia’s exchange deficiency with the USA has enhanced marginally since 1998, from a top of $14.2b in that year, to $12.5b in 2003. It was at its most minimal in 2011 at $10.7b, when the $A conversion standard was least against the $US. Somewhere around 2010 and 2012 Australia 's fares to the USA were worth over $16.2b every year, except they tumbled to $14.2b in 2013. The USA got 10% of Australia 's aggregate fares in 2013, down from 12% in 2010. The USA 's relative significance to Australia as a

There are three major economic factors that have combined contribution to FMG’s growth over the past 5 years, including the strong AUD , the amazing export feature due to the Chinese boom which drives up the commodity price and the interest rate decision by RBA. Australia dollar has appeared strong for the past 5 years and maintained at $6-$6.8 level for AUD/CNY at most time. It promised a high level of foreign income for Australia exporter. In 2009, China demanded almost 60% of the world’s iron ore to produce 47% of world’s steel production. It contributes the most to the price rocket from $31.78 to $180.6 US cents/mts in 5 years time. In addition, Australia borrowing cost remains high over the past few years which may alter the finance decisions of FMG.

The exchange rate is also a factor. As a currency depreciates and loses relative purchasing power, imports become more expensive and export prices

Exchange rate is the currency rate between two countries that is the price of one country currency is expressed in terms of another countries currency. For instance the rate of USD against PKR is, $1=97.7PKR. We have expressed exchange rate against USD because it is globally used for

The Real GDP % forecast for Australia is currently 2.8% and expected to decrease by 0.3%. The unemployment rate is predicted to remain at 5.9%, in line with market expectations (The Australian, 2017). The consumer prices in Australia increased inflation to 2.1% in 2017, with the market expected to rise a further 2.2%, making it the highest inflation rate since 2014 (Trading Economics, 2017). The current Government Bond 10Year Yield is 2.58%, indicating a consistent and stable economic growth (Trading Economics, 2017). It is important to note the increase in strength for the interest rates of USD and EUR against the AUD. (Economist, 2017). The RBA is unlikely to raise interest prices due to debt re-payment increase, which would has a negative economic effect due to the unbalanced supply and demand ratio within the market (The Economist, 2017). In correspondence with future political uncertainty, speculation is created over AUD depreciating against the USD within the next year from 0.77 to 0.66 and against EUR from 0.71 to 0.69 (Australian Dollar Forecast, 2017).

Exchange Rates. NZ has a floating exchange rate. The price of NZ’s currency in terms of other currencies is determined by the market forces. At present it is appreciating and is estimated to be at US$0.75 in 12 months’ time. Our dollar is now a prominent trading currency largely because of the sound performance of our economy and our stable political situation. An increase in the value of our dollar has a downward effect on export and import price levels. This is significant since when we buy goods or services from overseas we pay them in their currency. Perhaps this healthy exchange rate might discourage overseas visits to NZ for tourism and education purposes, but there is no clear evidence in support of this.

The exchange rate is the price of a nation’s currency in terms of another currency. The domestic currency and the foreign currency are the two components of an exchange rate. In a direct quotation, the price of the foreign currency is expressed in terms of the domestic currency and the vise versa is the indirect currency. Most exchange rates use the US dollar as their base currency and other currencies as the counter currency. There a few exceptions, the Euro and commonwealth currencies such as the Australian dollar, the British pound and the New Zealand dollar (Investopedia, LLC., 2014).

There are numerous factors that have been shown to influence and determine the real exchange rate, depending on the demand for a country’s currency. Among the most common influences are,