Question

Briefly describe the movements in the target cash rate from 2001 to 2017. How has the...

Briefly describe the movements in the target cash rate from 2001 to 2017. How has the movements in the cash rate influenced the value of the Australian dollar in the foreign exchange market?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution:

I have taken the data of cash rate and three major currency USD, Euro and GBP and analyzed the exchange rate with Australian dollar.

It is evident the data that the Average cash rate has declined since 2001 as it was around 5% and now it is around 1.5%. This decline is cash rate means a boost for the investments as lower interest rate increases the investments and lowers the savings. FDI and FPI must have increased, and this led to higher demand for Australian currency. Hence Australian Dollar has appreciated in this period.

The Australian dollar has appreciated in this period against these three major currencies. These can be seen from the data given below.

Exchange rate is as follows

1GBP = 2.80 AUD in 2001, 1 USD = 1.95 AUD, 1 Euro = 1.74

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose an economy open to international capital movements has a crawling peg exchange rate under which...
Suppose an economy open to international capital movements has a crawling peg exchange rate under which its currency is pegged at each moment but is continuously devalued at a rate of 10 percent per year. How would the domestic nominal interest rate be related to the foreign nominal interest rate? What if the crawling peg is not fully credible?
Predicting Exchange Rate Movements Whether international businesses are concerned with the long-term profitability of foreign investment,...
Predicting Exchange Rate Movements Whether international businesses are concerned with the long-term profitability of foreign investment, export opportunities, the price competitiveness of foreign imports, or the short-term foreign exchange transactions that occur on a daily basis, the firm must pay attention to exchange rate movements. These movements can affect whether a deal results in a profit or a loss. Exchange rate movements are extremely difficult to predict, though businesses need some forecasting ability to plan. A number of theories, methods,...
Target Market - Describe the target market within the new country. If this market differs from...
Target Market - Describe the target market within the new country. If this market differs from an existing market, explain how the firm will change its marketing strategy to meet the needs of this new market. Focus on the target market’s needs and how the benefits of the product will meet its needs.
1. Briefly describe Target corporation 2. Where would Target corporation report plant assets on its financial...
1. Briefly describe Target corporation 2. Where would Target corporation report plant assets on its financial statements? How are plant assets reported, and what is their value for Target corporation as the end of the year? 3. What is depreciation and how is it computed? Does Target corporation depreciate its plant assets? How do you know? What is the depreciation method used and the useful lives? How is the book value of plant assets calculated? What is the net book...
How can a CFO protect its company from market or foreign exchange risks? How would their...
How can a CFO protect its company from market or foreign exchange risks? How would their decision making be influenced if they are trying to protect their organizations from these risks?
Company A saved 1Billion dollars of internal cash in 2001 and 2002. Their debt to value...
Company A saved 1Billion dollars of internal cash in 2001 and 2002. Their debt to value ratio is around 40% in both 2001 and 2002. In order to finance a project in 2003, which costs 3 billion dollars, the company used 1billion dollar internal cash. The company had 3 billion dollars of internal cash before the project. The company’s cost of debt is the same as the cost of using internal cash. The market value of the company at the...
Company A saved 1Billion dollars internal cash in 2001 and 2002. Their debt to value ratio...
Company A saved 1Billion dollars internal cash in 2001 and 2002. Their debt to value ratio is around 40% in both 2001 and 2002. In order to finance a project in 2003, which costs 3 billion dollars, the company used 1billion dollar internal cash. The company had 3 billion dollars internal cash before the project. The company’s cost of debt is same as cost of using internal cash. The market value of company at the end of 2003 is 150...
On April 1, 2017, Mendoza Company borrowed 518,000 euros for one year at an interest rate...
On April 1, 2017, Mendoza Company borrowed 518,000 euros for one year at an interest rate of 5 percent per annum. Mendoza must make its first interest payment on the loan on October 1, 2017 and will make a second interest payment on March 31, 2018 when the loan is repaid. Mendoza prepares U.S.-dollar financial statements and has a December 31 year-end. Prepare all journal entries related to this foreign currency borrowing assuming the following exchange rates for 1 euro:...
Topic 1: The target for overnight rate was 1.00% for a long time from September 8,...
Topic 1: The target for overnight rate was 1.00% for a long time from September 8, 2010, but on January 21, 2015, the Bank of Canada lowered the target for the overnight rate to 0.75%, and on July 15, 2015 it lowered the target rate to 0.50%. Why do you think the Bank of Canada decided to lower the rate? What do you expect the movement of exchange rate of Canadian dollar?
Answer the following questions and give an explanation of WHY you selected that answer. Please type...
Answer the following questions and give an explanation of WHY you selected that answer. Please type the answers. 1. If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in 90 days to make payment on imports from Canada, it could: A - Obtain a 90-day forward purchase contract on Canadian dollars. B - Sell Canadian dollars 90 days from now at the spot rate. 2 - In general, when speculating on...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT