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Economics Assignment - “Is the Australian Dollar Overvalued”

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Added on  2020-03-16

Economics Assignment - “Is the Australian Dollar Overvalued”

   Added on 2020-03-16

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Running head: ECONOMICS ASSIGNMENT Economics AssignmentName of the StudentName of the UniversityAuthor Note
Economics Assignment - “Is the Australian Dollar Overvalued”_1
1ECONOMICS ASSIGNMENT Table of ContentsAnswer a:.........................................................................................................................................2Answer b:.........................................................................................................................................3Answer c:.........................................................................................................................................6Answer d:.........................................................................................................................................6Answer e:.........................................................................................................................................6References........................................................................................................................................6
Economics Assignment - “Is the Australian Dollar Overvalued”_2
2ECONOMICS ASSIGNMENT Answer a: This section of the assignment takes into account the article “Is the Australian Dollarovervalued”, by Myriam Robin and tries to discuss the issues reflected in the article. Australiabeing one of the most dominant economies in the global framework, the dynamics of theAustralian dollar, with respect to the international scenario, is a significant matter of concernamong the economists, speculators and the governing authorities of the country as well as in theinternational framework (Smh.com.au, 2017). According to the article, though the Reserve Bank of Australia posits that theperformance of the domestic currency has been satisfying, there has been difference in opinionregarding this aspect as there has been a lot of speculation going on with respect to the dynamicsin this value over time. However, an increase can be observed in the overall value of thedomestic currency in the current year, when measured in terms of the American dollar and alsothe domestic currencies of China, Britain, European territory, Japan and Indonesia (Smh.com.au,2017). However, the studies with respect to the Westpac Model and also in the opinion of thecurrency strategist of NAB, show that there has not been a considerable appreciation in the valueof the AUD, as has been shown by the opponents, which actually helped the country to come outof the post-boom period in the domestic mining industry. However, though there are conflictsregarding the direction of dynamics of the Australian currency in the recent period, there is anunanimous agreement on the fact that the value of the AUD with respect to the trade weightindex has increased considerably in the recent period. This, in its turn, can be attributed to therise in the country’s terms of trade (Beckmann and Czudaj 2017). As per another version of
Economics Assignment - “Is the Australian Dollar Overvalued”_3
3ECONOMICS ASSIGNMENT opinion, the change in the interest rate of the USA, provided that the rates in Australia are keptsame, may lead to significant fluctuations in the dollar value of the country as in thecontemporary economy, with expanding trade relations, the inter-linkage between the countriesare increasing. Answer b: Like any other economic variable, the value of the domestic currency of any economy, isdetermined by the demand and the supply of the same in the economy. The players in thedemand and supply side of the currency markets are usually the international banks, companies,the speculators, and the investors who deal in the monetary market in the global scenario.According to the demand supply model of exchange rate, the same for an economy is determinedby the demand and the supply of its domestic currency, which in turn is influenced by the factorslike the inflation rate, rate of growth, rate of interest and the government framework (Frenkel andJohnson 2013).
Economics Assignment - “Is the Australian Dollar Overvalued”_4

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