Australia's Exchange Rates And The Effects From Global Events

1161 words - 5 pages

INTRODUCTIONThe purpose of this report is to document and bring to surface the burdening issue of the effect of global economic conditions on Australia's exchange rate. The beginning of the report details what the exchange rate is and how it can be defined. Following that is a look at the effects of major events on the exchange rate and the government's reaction to these events. The report will also analyse what effects occur from a falling country for Australia and some possible strategies to help combat these.WHAT ARE EXCHANGE RATESThe exchange rate can be defined as the price of a specific currency in terms of another currency. Exchanging currencies is essential for international transactions so countries can operate with their own currency. The method by which that price is determined depends on the particular exchange rate mechanism adopted in that country. Australia currently implements the 'floating exchange rate system' where the exchange rate is determined by the market forces of supply and demand. This system means that the price of the Australian dollar is normally decided in the foreign exchange market by overseas currency buyers (demand) and local currency sellers (supply). This change to the floating system occurred in 1983 while prior to that year Australia utilized the 'fixed exchange rate system' where the exchange was officially set and controlled by the government.Anybody of interest is able to buy and sell currencies and what is and because exchange rates are constantly fluctuating so it is possible to gain significant income from the transactions.MAJOR EXTERNAL EVENTS THAT AFFECT THE EXCHANGE RATEThere are a considerable amount of major external events that impede upon our exchange rate. Because we use the floating exchange system our exchange rate all comes down to the supply and demand of our products and currency. The most concerning events that affect our exchange rate are listed below: A recession that occurs overseas impacts on our currency because it cuts demand for our exports. This can cause imbalances and volatility for the Australian currency in conjunction to the troubled country Acts of war and terrorism have major effects as they cause falls in the economy and prevent countries trading with another because of the dangers of the unstable market. Drops in world commodity prices received for our exports depreciates the dollar and reduces the demand for our products Overseas investment falling and Australian producers not being as efficient or competitive then other countries producers create disinterest for Australia and our supply and demand decrease and hence exchange rates fall as well. Speculative projections from international entities can also put the Australian dollar under pressure because they could misinformTHE GOVERNMENTS INTERVENTIONTo combat the above problems the government intervenes to ensure stabilisation of the Australian dollar. The government can manage the...

Find Another Essay On Australia's Exchange Rates and the effects from global events

Global Financing and Exchange Rate Mechanisms Paper

887 words - 4 pages main global hard currencies are the U.S. dollar, Swiss franc, Deutschemark, and Japanese yen. Each of the previously listed currencies is backed by a gold reserve, making them a stable standard of exchange.Soft currency is a "currency from a country that is not economically and politically stable, or in which there is not widespread confidence in the exchange rate. The governments of such countries set an unrealistically high exchange rate, and

Global Financing and Exchange Rate Mechanisms

999 words - 4 pages one and globalization is occurring. Unifying the currency plays a large part in unifying multiple countries. The euro is beneficial to Europe; it is something that represents the world's progress as a whole and its integration into Europe will benefit every country.References:Antweiler, W., 2001. The Euro Europe's new currency. Retrieved November 6, 2006,from Economics, 2001. International effects of the Euro

Global Financing and Exchange Rate Mechanisms

1016 words - 4 pages careful track of their transactions and investments. We will define how hard and soft currency and how they apply to the global financing and exchange rate mechanisms.Hard currency is defined by, "A currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services. A hard currency is expected to remain relatively stable through a short period of time, and

Global Financing and Exchange Rate Mechanisms

749 words - 3 pages Columb. Retrieved June 9, 2009, from, Denise. (2007). In the world of cash forecasting, change is accelerating as more and more companies look to improve forecasting in order to better manage liquidity. Global Finance. Retrieved June 9, 2009, from, Sheri. (2003-2009). What is currency?. conjecture corporation . Retrieved June 9, 2009, from Electric Company . (2006). Global Operations. Retrieved June 8, 2009, from

Global Financing and Exchange Rate Mechanisms.

892 words - 4 pages ." ( Currencies.Another name for "weak currency," there is very little demand for this type of currency and values often fluctuate. Currencies from most developing countries are considered to be soft currencies. ( Currencies.A currency, usually from a highly industrialized country, that is widely accepted around the world. The U.S. Dollar and the British Pound are good examples of a hard currency

Global Financing and Exchange Rate Mechanisms: Countertrade

600 words - 2 pages , clean up bad debt, and build customer relations. Some downfalls of countertrade may be the exchange of bad quality goods, time consuming and risky.Resources:Richardson, T.G. (2005). Countertrade. Retrieved October 23, 2008 from Website: Barter Group. (2007). Retrieved October 24, 2008, from

Global Financing and Exchange Rate Mechanisms - 1174 words

1174 words - 5 pages consumers from foreigners that offered services of a differing technological standard, or of a lesser quality.There is now a much greater acceptance on the part of national governments on the need to open up markets to foreign competition and include services under the rubric of international trade treaties. To a large extent, this has come about due to the growing trend towards inter-country deregulation and privatization in many countries

Mega Sports Events and Its Effects on the Cities

539 words - 3 pages Mega events are short-lived collective-usually cultural-actions that have long-lived pre- and post-event social dimensions, impacts and effects, which include world expos, Live Aid concerts, Earth Summits, Olympic Games, World Cups, bring together various signifiers of an emergent global order (Roche, 2003). Mega events such as the Olympic Games and FIFA World Cup are also known as mega sport events. Mega sport events are seen to have the

The Causes and Effects of Global Warming

2747 words - 11 pages idea is ludicrous. As the global population grows and more countries become industrialized, their dependency on energy will only increase.To stabilize world climate it is estimated that we would need to cut emissions rates by 50-70 percent (Godrej 107). This is a far cry from the 5.2 percent cut that was agreed upon in the Kyoto Protocol. The majority of the countries represented at the Kyoto conference were against major cuts in emissions and the

The Effects of Injustice, Corruption, and Crime Rates on South African People

2249 words - 9 pages . The apartheid and the ANC both participated in corrupt and unjust practices that resulted in the ill-treatment of the people, increased poverty and unemployment rates, and high levels of criminal activities. The apartheid and the ANC are responsible for the adversities that were mainly caused by injustice, corruption, and high level crime rates. The apartheid system demonstrated unjust practices that prevented the people of South Africa from

Global Financing and Exchange Rate Mechanisms: Hard and Soft Currencies

1018 words - 4 pages Bangladesh are considered countries with soft currency. Current forms of soft currency are the Russian ruble, Mexican peso, Philippines peso, and the Hong Kong dollar. Generally, the governments from these developing and low income countries set unpretentiously high exchange rates, and compare their currency to hard currency such as the United States dollar or British pound. For example, the Russian ruble is considered a soft currency because Russia is

Similar Essays

The Changes In Foreign Exchange Rates

2249 words - 9 pages can have on the global economy suggests understanding how to forecast exchange rates is essential. There are several methods in which foreign exchange rates can potentially be predicted which are based upon parity conditions, balance of payments, and the asset market. After an evaluation of each of these methods, an assessment will be provided suggesting the best approach for financial managers to utilize as they attempt to forecast exchange

How Exchange Rates Are Determined And Their Impact On The Australian Economy

1383 words - 6 pages services.Exchange rates play a central role in the relationships between individual economies and the global economy, and due to the increasing impact of globalisation on the Australian economy, and the importance of international trade, exchange rates play a major role in determining aspects of the economy which can affect the business cycle. Bibliography'Australia in the Global Economy' by Tim Dixon & John O'mahony

Global Financing And Exchange Rate Mechanisms The Big Mac Index

1265 words - 5 pages Global Financing and Exchange Rate Mechanisms 1 Global Financing and Exchange Rate MechanismsGlobal financing and exchange rates have become an important issue for global business. Extreme increases in the price of oil and other commodities and inflation has led to significant exchange rate risks in today's global markets. The following will analyze purchasing power parity and the "Big Mac Index", explain how purchasing power parity and the

Understanding Exchange Rates And Their Impact On Management Financial Decisions.

3021 words - 12 pages operations in a global economy. There is money to be made by managers who can effectively manage exchange rates in the course of their business dealings. There is money to be lost by managers who fail to recognize the significance of these rate relationships.In an effort to better understand the affects of exchange rates, we need first to define the term exchange rate. This will require looking closely at the relationship between the exchange rate and