Exchange Rate Movements in AUD/USD & AUD/JPY since 2019

BEA309 INTERNATIONAL
FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
Books and Journals......................................................................................................................7
Online..........................................................................................................................................7

INTRODUCTION
International finance is concerned with such monetary transactions that took place
between countries. Accordingly, major areas that the study pertaining to international finance
focuses involves currency exchange rates, foreign direct investment, etc. The present essay is
based on the discussion pertaining to the exchange rate movements in two bilateral exchange
rates that is, AUD/USD & AUD/JPY since 2019. With this, the expected performance of these
currencies in the upcoming two years would be explained to the management of Stellar
Resources who is going to expand its lithium operation by exporting to Japan & US. For this, all
the key drivers of bilateral exchange rate would be taken into account.
MAIN BODY
Australia follows the floating exchange rate system where the movement in AUD
exchange rate is determined through the supply of & demand for AUD in the foreign exchange
market. Several factors are there which affects the supply & demand of the currency in the
market where some have long run effects while some have short run effects on the currency
value like AUD.
Bilateral exchange rate described as the value one currency that is, AUD with regards to
the value of another currency like USD (Bahmani-Oskooee and Fariditavana, 2019). For
example, AUD/USD shows the value of AUD in relation to the USD which gives an idea of how
many USD are needed for buying one unit of AUD. If AUD/USD is 0.75, this means that 0.75
USD is needed to make the payment of 1AUD. With the increase in the value of AUD with
reference to another currency, this means appreciation of currency and in the event of reduction
in the value of AUD with reference to another currency, this means depreciation of currency.
The following is the chart showing appreciation and depreciation of AUD with reference to