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Exchange Rates
The appreciation of the AUD will make the British buyer to pay
GBP 115.5 extra for the flowers imported. Therefore, Australian
exports have become more expensive for importers and this
could decrease the competitiveness of Australian exports. The
appreciation of the Australian Dollar would discourage the
British importer in future because the importers have to pay
more due to the appreciation of the Australian Dollar. This
could affect the Australian exports because exports (flowers in
Praveen Jude Cooray ( COPJB92)
as the importers will have to pay more for the goods. There
hasn’t been a significant fluctuation in the exchange rates till 09
Nov. There is a significant appreciation in Sri Lankan Rupee and a
depreciation in the Australian Dollar from 9th to 13th November.
There hasn’t been a major fluctuation from 17th to 21st Nov. The
Rupee has appreciated from 21st to 23rd Nov and there is a
gradual decrease in the Australian Dollar from 22nd Nov to 23rd
Nov. Again, there isn’t much fluctuation from 25th to 27th of Nov
and there is a significant appreciation of the Australian Dollar
from 28th Nov – 02nd Dec.
c.
The Aussie dollar has appreciated strongly against the USD
in recent times. Discuss the consequences of this
appreciation for Australia’s Balance of Payments. [5 marks]
Consequences of the appreciation of the Aussie Dollar
against the USD to Australia’s Balance of Payment
Appreciation of the Australian Dollar against the USD will decrease
the competitiveness of Australia’s exports and import – competing
industries. The Dollar is appreciated Australian’s have to pay less
for imports simply for the reason that the Australian dollar is
relatively stronger than other currencies. Therefore, imports can be
cheaper than the domestic products and this will result of an
increase The Australian Dollar. There are other advantages to
Australians such as cheap overseas travel, and farmers earn more
money for their harvest and inflationary pressures can be reduced
at the same time.
On the other hand this will affect Australia’s balance of payment.
Balance of payment is the account of a country’s exports and
imports. In this instance where the Australian Dollar is appreciated
strongly appreciated against the USD will decrease the
competitiveness of the Australian exports and Australian produces
could get discourage because they won’t get better value for their
products. This could reduce the value of the exports of the balance
of payments. At the same time its cheaper for Australians to buy
goods from overseas because they have to pay less for the imports
because the dollar is much stronger than USD. This will increase the
imports of Australia. Therefore, this could result of an increase of
imports and decrease of exports which will affect the balance of
payment of Australia.
CONCLUSION
All the answers for the above mentioned questions reveals that
Praveen Jude Cooray ( COPJB92)