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6 F
chapter
rate
exchange
i ) Definition 1- floating exchange rate SYS
\ Index LTWI )
Trade weighted
⑤
ii ) Factors that affect exchange rate
positive
iii )
Effects I
negative
brief 1 App )
v7 Trend
v43 concept
Exchange rate
.
price ofone currency in terms of another .
• Currencies are
bought and sold
and
•
btw systems -
systemsmanaged
1
eg against
. USD ,
RMB ,
Ringgit
\
supply ↓
demand ↑ .
Supply 6
I
-
-
-
=
-
- - -
.
as i
0.5
t;
-
-
-
-
I 1
1
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,
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! ! 5 Quantity it s
o
demand ↓
Depreciation
-
\
supply ↑
S S
* Si
0.5
-
-
-
,
- -
-
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i
-
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i
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Artur
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÷
that contributes
currency strength
g.gyaw.mgygi.name?.g.U
i.
commodity prices and terms of trade
2. Relative interest rates
3. world economic rate
growth
4.
Speculation
iron ore ,
coal
-
commodities is
price inelastic
-
even if price ↑ demand still ↑
,
of ↑
-
demand comm → demand AUD
-
-
☒ revenue ↑
→
appreciate
→
attract foreign investors
_B demand for AUD ↑
→
appreciate .
4 Speculation
the future
speculate appreciation of AUD in
is related to speculation
-
↓
interest rate is
relatively
→ price goods and services ↓
of
education
& services exports ( tourism )
.
→ non commodity
-
2. foreign investment
foreign investment eguility egnility
-
2. -
Depreciation
1. Prices of imports & ✗ports -
Boas 1 . Prices of MP & XP -
BOAS
IN THE LONG RUN
d↓ IN THE AUD ↓
AUD
N= → ✗ PI &
=
Bohs .
-
So L ↓
equitty
( China Jpn .
US )
2. Foreign investment
,
equility Aub ↓ -
outflow income
→ more in primary
→ Npy worsen → CAD worsen .
3. External shock -
find substitute
A- up d↓
→ servicing cost ↑ -
demand for domestic g&S ↑
→
interest payment ↑ → diversification
_
expansion
→ debt trap .
previous investment
import MY ↑
A- up d↓ higher Roz when converted
- into AUD
- raw imparted ↑
material → profit dividend Interest
,
income
→ inflow in primary
-
inflation .
- NPY
improve
.
depreciation
appreciation .
HE
he
Cuvrintaccount
BMS ↓ GFC -107 unfavourable
/
of of
,
:
10 -11 :
Boas ↑ recovery period export ↑
.
CAD ↑
15 -16 : BOGS -
TDT fav
<
demands for mineral ↑
Return investment
NP 4 *
on
industry ↑
-
from
mining
Cnb ↑
rise in
price of commodity -
iron one
19 -
is :
Bohs ↑ -
To / favourable
XP I ↑
-
appreciation pub -
demand for
-
Mon one
pandemic
-
Lots
,
in port ↓
NPY ↑ -