Question

a. The Australian dollar against the US dollar (and against other major currencies) has appreciated in recent months (mid-March 2020 to early June 2020). Identify the underlying drivers and the implications of this rising exchange rate in Australia.

Answer 1

Over the previous decade, the Australian dollar has acknowledged absolutely in opposition to the US dollar. While the ascent can be credited to various elements, the mining blast has been the key driver of the increase over this period.

The essential motivation behind why the AUD has acknowledged such a great is that Australia's expressions of exchange have multiplied over this period, fundamentally because of ascends in world costs for our ware sends out.

From a certain economic point of view, an ascent in ware trade costs raises the harmony authentic swapping scale since it prompts expanded interest for Australian merchandise, requiring their charge to raise comparative with foreign goods. This typically happens for two reasons:

• Higher item costs lead to expanded venture to grow limit in the assets part; and
• Higher total earnings coming about because of the ascent in terms of exchange lead to an expansion utilization, spending a bit of which is on domestic products.

The appreciation in the Australian dollar is likewise in accordance with what one would anticipate from the perspective of different markets where the swapping scale assumes a significant job. From money related market point of view, an ascent in asset costs raises the harmony conversion scale for two reasons:

• The pace of profit for capital put resources into the assets segment rises; and
• The boost to residential interest from higher salaries may require a more tight financial arrangement than something else, bringing about higher loan costs.

From a distant trade showcase point of view, an ascent in the costs of ware sends out builds interest for AUDs through both expanded fare receipts and expanded capital inflows in light of more significant yields on Australian resources.