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AUD to USD Exchange Rate Assignment

   

Added on  2021-04-16

8 Pages1226 Words59 Views
AUD/USD EXCHANGE RATE 1AUD/USD EXCHANGE RATEBy (Name)Name of the class (course)The Course instructor (Professor)The InstitutionThe City and State locationThe Date

AUD/USD EXCHANGE RATE 2a.Exchange rate determinationUSD/AUDGraph 1Quantity (USD)USD/AUDGraph 2Quantity (USD)S0S1DQ1Q2P1P2SD0D1Q1Q2P0P1

AUD/USD EXCHANGE RATE 3The value of Australian dollar in the forex market is influenced by the forces of supply and demand. For example, if the demand for Australian dollar in American rise as depicted in graph one, the supply-demand relationship will make the Australian dollar to appreciate. If the demand falls, the value of Australian dollar will also decline. On the other hand, if the supply of Australian dollars increases as shown in graph two, then its value will decline. Factors Influencing the Fluctuation of the Australian DollarInflation RatesIf inflation levels are low in Australian than in the United States, then the exports of Australia to the United States will be more competitive and there will be a rise in demand for the Australian dollar. As a result, the value of Australian dollar in comparison to U.S dollar will increase. Conversely, if inflation is high in Australia compared to the United States, then the value of Australian dollar will drop. Interest RatesIf the interest rates in Australia are high than in the United States, more investors will be drawn to deposit money in Australia since they will get better earning for saving in Australian banks. Thus, the demand for Australian dollar will go up and cause an increase in its value. Equally, if the interest rates in Australia drop, then the value of Australian dollar will decline. Balance of PaymentsIf the current account deficit of Australia increases because it is spending more of Australian dollars on imports than its proceeds from exports, then the Australian dollar will depreciate. On the other hand, if Australia’s current account deficit declines due to high export earnings than

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