Question

The Australian dollar exchange rate increased from $US0.85 in June 2018 to $US1.07 in June 2019 and it increased from 70 euro cents in June 2018 to 74 euro cents in June 2019. (a) Did the Australian dollar appreciate or depreciate against the U.S. dollar? Did the Australian dollar appreciate or depreciate against the euro? Explain your answers.

(b) What was the value of the U.S. dollar in terms of Australian dollars in June 2018 and June 2019? Did the U.S. dollar appreciate or depreciate against the Australian dollar over the year June 2018 to June 2019? Explain your answers.

Answer 1

Australian Dollar Exchange rate aginst dollar in June 2018 = $0.85

Australian Dollar Exchange rate aginst dollar in June 2019 = $1.07

Australian Dollar Exchange rate aginst euro in June 2018 = 70 cents

Australian Dollar Exchange rate aginst euro in June 2019 = 74 cents

a) Australian dollar have appreciated against dollar from 2018 to 2019 because in 2018 it could buy $0.85 but in 2019 it can buy $1.07 frm the same Australian dollar.

Australian dollar have appreciated against euro because it could buy more of the euro cents in 2019 than 2018 with the same Australian dollar.

b) U.S. dollar in terms of Australian dollar in June 2018 = 1 / 0.85 = 1.17

U.S. dollar in terms of Australian dollar in June 2019 = 1 / 1.07 = 0.93

U.S. dollar have depreciated from 2018 to 2019 because same dollar could buy less of Australian dollar in 2019 than in 2018.