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Explain how the exchange rate of the aud is determined

Assignment Help Macroeconomics
Reference no: EM131916687 , Length: word count:2000

Assignment: Research Report

Read the article titled "Australian dollar tipped to slide back to 70 US cents" (Sydney Morning Herald January 29, 2018, uploaded to Moodle), and answer the following questions:

(a) Using a Demand and Supply model of exchange rate determination, briefly explain how the exchange rate of the AUD is determined in the forex market, and what factors influence fluctuations of it.

(b) Using nominal exchange rate data and trade weighted index data from the Reserve Bank of Australia website (use monthly data for the last three years) and analyse the movement of the AUD relative to that of the USD using a graph. In your opinion what are the factors contributing to this behaviour of the AUD?

(c) Summarise the main issues discussed in this article. Using the demand and supply framework discussed in part (a), show and explain how these main driving forces would impact the AUD/USD exchange rate.

(d) Suppose you are a manager of an Australian firm which imports electrical machinery from the US. Some of the analysts interviewed in the article expect that the AUD/USD exchange rate is going to change from US 80C per AUD now to US 70C per AUD one year from now.

Explain the impact of this depreciation of the Australian dollar on your firm. Thinking about the overall Australian economy, who will benefit and who will lose from such a depreciation?

(e) Suppose that the AUD/USD exchange rate stabilises at around US 72C per AUD one year from now. What action could the Reserve Bank of Australia take in order to bring the exchange rate back to US 80C per AUD, and what side effects might this action have on the Australian economy? Do you think that such actions would be a reasonable economic policy? Explain your answer.

Marking Guide: marking guide is uploaded on Moodle. Please refer to the marking guide for marking criteria and question weights.

Word Limit: 2000 words maximum. Word count (excluding references) must be provided.

Article - Australian dollar tipped to slide back to 70 US cents by Netty Ismail

Verified Expert

The paper is about the current status and the future expectations regarding the Australian dollar-US dollar exchange rate. It discusses the unsustainable appreciation of the currency in the recent past. It also incorporates the viewpoint of people in the financial industry and the factors affecting the Australian dollar in the coming future.The paper has been prepared in Microsoft office word document.

Reference no: EM131916687

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Reviews

len1916687

3/27/2018 2:27:51 AM

• Assignment cover sheet/ signed as own • Tables/graphs, if applicable, are properly prepared and labelled References (10 marks): • List of references (minimum 5 references) attached • Inclusion of all in-text references in the Reference List • Harvard Style should be followed (author date system) • Alphabetical order should be followed (Excessive use of web sources should be avoided) Marks will be reduced for: 1. Cutting and pasting of graphs and figures from online sources 2. Evidence of plagiarism /collaboration 3. Late submission

len1916687

3/27/2018 2:27:38 AM

• Relevance of material presented • Display of theoretical knowledge as necessary • Adequacy/coverage of the topic When you answer each part of the question, please ensure to meet the above requirements as much as possible. Marks are allocated as follows: Part a - 12 marks Part b - 12 marks Part c - 12 marks Part d - 12 marks Part e – 12 marks Total 60 marks Research Depth (20 marks): • Evidence of wider reading relevant to the question/s • Justification of strong comments/arguments with appropriate references in the text • Relevant data/information gathered from reliable sources Presentation (10 marks): • General formatting (space, paragraphing, page break etc.) • Grammar and spelling checks • Appendices if appropriate

len1916687

3/27/2018 2:27:25 AM

ECON910 T1/2018 Research Report - Marking Guide Marks will be allocated according to the following criteria: • Analytical Ability 60% • Research depth 20% • Presentation 10% • References 10% Analytical Ability (60 marks): • Correct understanding of the question(s) • Definition/explanation of key concepts • Analysis/ discussion of the question ensuring a meaningful flow of ideas in relation to the main theme • Adequate data are presented and graphs properly drawn (where necessary)

len1916687

3/27/2018 2:27:12 AM

Note that your analysis is based on the exchange rate of the Australian Dollar and United States Dollar (commonly abbreviated as AUD/USD). For the purposes of this report assume that the current AUD/USD exchange rate is US 80C per AUD. Submission Instructions: Submit your report by 5pm on Thursday of Week 8 online Via Moodle. In addition to the online submission, hand in your hard copy of the assignment to the tutor on or before Week 8 of Trimester 1. Assessed work submitted late will be penalised by the deduction of 10 percent of the maximum possible mark for that assessment per working day or part thereof. The operation of this rule will not result in a negative mark being carried forward.

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