Outline the causes of a decrease in demand for the Australian money, and discuss the effects on the Aussie economy of a sustained...

Essay Four (Exchange Rates): Theme 2 – Australia inside the global Economic system Outline what causes a reduction in demand for the Australian buck, and discuss the affects on the Aussie economy of your sustained depreciation of the Aussie currency. The exchange rate is a way of measuring the value of a currency relative to another and is also influenced by demand and supply of the Australian Dollar (AUD). Changes in some of the factors that affect source and require causes the AUD to rise or land. The demand for the AUD is derived from the necessity of Australia's goods, services and property, which is impacted by domestic and international monetary conditions. Therefore , factors such as decreased capital inflow by investors, decreased demand for Australian exports and speculation that the AUD will certainly fall are the predominant reasons behind the reduction in demand with the Australian dollar. This reduction in demand has ended in a endured depreciation with the Australian money that has resulted in various great and unfavorable implications to get the Aussie economy. Capital inflow effects the exchange rate as foreign traders wanting to purchase Australia must exchange their own currency pertaining to Australian dollars therefore impacting the demand intended for Australian foreign currency. The level of Aussie interest rates relative to overseas interest levels may effect their purchase decisions. Lately the interest charge has dropped from a few. 75% in-may 2013 to 2 . 25% in 04 2015, triggering a decline in the amount of international investment, since investors are certainly not gaining all the return on the investment. Rather investors check out investing in various other stable countries such as China or Fresh Zealand with an intention rate of 6% and 2 . 5% respectively due to possibility of larger returns, for that reason decreasing the need for the AUD. In addition , expectation of lower degrees of domestic financial growth will certainly influence the size of the capital inflow and decrease the demand for Aussie dollars, causing...



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