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Exchange rate

Contents

Executive Summary 3

Introduction 3

Trend in exchange rate 4

Effect of Appreciation and Depreciation of the Currency 9

Recent Trend 11

Conclusion 12

References 12

Executive Summary

Australian economy has been performing well among the top developed nations. Its exchange rate is almost equal to USD dollar and it plays an important role in the economics of the nations since it is an export driven country. Appreciation or depreciation of the currency affects the economy of the nations. These affects are discussed in this report.

AUD has been volatile in the recent months. It has appreciated as well as depreciated over a last 1 year. Since Australian economy is largely dependent on commodities any change in global demand as well as the prices affects the exports and thus the exchange rate. With the increase in the demand as well as the price of the commodities the exchange rate will appreciate and the vice-versa.

The effects of the interest rates on currency and the inflation and the interrelationship between them have also been discussed. The complex relationship between the macro variables and the way it affects each is essential to understand and this has also been discussed in this report.

It can be observed that exchange rate for Australian is highly dependent on the commodity demand and this lead to the change in the exchange rate of AUD which has its effects on the GDP, inflation.

Introduction

Exchange rate plays an important role in the economics of the nation. Australia economy is mainly export driven economy and it exports a lot of minerals. For an export driven economy the exchange rate is an important parameter. It is a key parameter that helps in maintaining the equilibrium in the economy on both the financial as well as the real sides. Exchange rates are seen as the nominal exchange rate and the real exchange rate.

Appreciation or depreciation of the currency plays an important role and the central bank...