Question

. Provide some facts about the FIRST currency in your chosen quote. (That is, if your quote is AUD/USD, provide some facts on the AUD. If your quote is USD/AUD, provide some facts on the USD. (about 250 words). [20 marks]
(Notes: For example, you might discuss whether the currency is fixed or floating, when this happened, how much trade is there in the currency, how this compares to others currencies and so on.)

Answer 1

My quote is USD/AUD.

In reality, no currency is wholly fixed or floating.In a floating regime, the central bank may also intervene when it is necessary to ensure stability and to avoid inflation. However, it is less often that the central bank of a floating regime will interfere.The U.S. dollar and other major currencies are floating currencies—their values change according to how the currency trades on forex markets.A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate

The history of Western Civilization, from the Renaissance onward is mostly a history of stable currencies, pegged to gold and silver--and in some cases actually made from gold and silver. Floating currencies have always existed, but they were always on the margins. The most successful countries always had a gold-linked currency.This was the case until 1971. In 1971, the most successful, most influential country was of course the United States, which had used a gold-linked currency from its inception in 1789. The first 182 years of U.S. history were on a gold standard. In the spring of 1973, the other countries of the world had reached their limit. They would no longer play along with Nixon's currency games. They delinked their currencies from the dollar, and the world's currencies began to float independently. Floating exchange rates have their benefits.When the global floating currency system first appeared, on August 15, 1971, it was supposed to be a temporary measure. They didn't even know, at the time, that a new system had emerged.The global floating currency system, the system we have today, was an accident.

All world's imports are invoiced in dollars.Indeed the dollars share as an invoicing currency is estimated to be around 4.7 times its share in world imports. To highlight how special the role of the dollar is it is useful to contrast this with the share of the other major global currency, the euro, in trade. The euro's share as an invoicing currency in world exports is 1.2 times the share of euro country exports. In other words while some non-euro countries invoice exports in euros this is of a much smaller magnitude than the use of dollars.In other words most countries do not use their own currency for exports. The vast majority of currencies rely heavily on foreign currency invoicing. The asterisk next to euro country names flags that this refers to their trade with‘non-euro’ countries. Indeed the U.S. dollar is an important international reserve currency along with the euro. The euro inherited this status from the German mark, and since its introduction, has increased its standing considerably, mostly at the expense of the dollar. Despite the dollar's recent losses to the euro, it is still by far the major international reserve currency, with an accumulation more than double that of the euro.

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