Essays on Stress on Australian Dollar Assignment

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The paper "Stress on Australian Dollar" is a great example of a Macro & Microeconomics assignment.   The article is mainly focused on the state of the Australian dollar and the expected behavior in the near future. The Australian dollar has depreciated notably and experts are concerned that the fall in value against the US dollar may increase. Several factors have been discussed as the reasons for the fall.   These include buying by funds looking to hedge bets that the decline will continue sudden increase in Australian corporate and state bond-buying by Japanese investors, mergers and acquisitions, end yearbook balancing and currency-hedging by Australian exporters, and bets in the market that RBA is done with cash rate cutting in the current cycle. Some people also argue that the Australian dollar may not depreciate further than it currently is and that several market factors will combine to ensure the Australian dollar recovers its value against the US dollar.

The mentioned factors include the position of Australia as the major exporter of coal and other services like tourism and higher education. There is also interest by the investors in the Australian assets.

These have kept the Australian dollar afloat. The Australian dollar has also developed a demand from unlikely quarters like real-time money investors which include sovereign wealth funds, infrastructure funds, and equity investors. Exchange rate determination Supply and demand are the two forces that determine the prices of goods and commodities, as well as the exchange rate. The interaction of these forces occurs in an open market. The law of supply and demand indicate that; scarcity of a commodity leads to an increase in the price of the commodity; highly supplied commodity tend to cost less while high demand of a commodity leads to the increase in the price of the commodity; abundant supply of a commodity leads to falling in its price.

The above scenarios lead to the conclusion that when the price of a commodity increases, the commodity appreciates in value, whereas an increased supply of a commodity makes it decrease in value.

References

Reserve Bank of Australia 2016, The Exchange Rate and the Reserve Bank's Role in the Foreign Exchange Market. Available from http://www.rba.gov.au/mkt-operations/ex-rate-rba-role-fx-mkt.html [October 6, 2016]

The Sydney Morning Herald 2010, Aussie now fifth most-traded currency. Available at http://www.smh.com.au/business/aussie-now-fifth-mosttraded-currency-20100901-14nma.html [October 6, 2016]

Kneoma 2011, World Bank Commodity Price Data (Pink Sheet), Monthly Update. Available at https://knoema.com/WBCPD2015Oct/world-bank-commodity-price-data-pink-sheet-monthly-update [October 6, 2016]

CMS 2014, Exchange Rates and Supply and Demand. Available at http://www.cmsfx.com/forex-education/online-forex-course/chapter-2-fundamental-factors/exchange-rates-supply-and-demand/supply-and-demand/ [October 6, 2016]

Evrensel A 2016, How to Determine Exchange Rates through Supply and Demand. Available at http://www.dummies.com/education/finance/international-finance/how-to-determine-exchange-rates-through-supply-and-demand/ [October 6, 2016]

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