Aussie Dollar expected to stay strong for months

SMH.com.au

Oct. 26 2010

http://www.smh.com.au/business/markets/aussie-dollar-expected-to-stay-strong-for-months-20101026-1715s.html

This article, published back in October of 2010, indicates that the Australian Dollar will be above 90 US cents throughout 2011 as the Reserve Bank of Australia continues to raise interest rates in the aftermath of the Global Financial Crisis.

During this period in October 2010 the Australian dollar had reached parity with a high of 100.04 US cents, and that has been driven because the US Federal Reserve will print money to stimulate the economy has depreciated the US dollar against the Australian dollar and lifted commodities.

The Reserve Bank of Australia received a report that stated that Australia's economy is unlike the United States, it 'dances to a different drum' and continuing good economic news is likely for the RBA to lift interest rates again.

Since then the Australian dollar has jumped above parity and only going below that in March after the Japanese earthquake and tsunami, but since recovering over that again.

In Commerce we have found that the Australian Dollar can appreciate and depreciate against different currencies. At the moment as the Australian dollar is recovering from the Global Financial Crisis is it appreciating against the US Dollar, which has begun to print money- which can lead to hyperinflation, as we have learnt that in Commerce as well with cases in the past such as Germany, Zimbabwe and Argentina.

Dollar rises against yen as calm returns to markets

Newspaper- SMH.com.au

March 22 2011

http://www.smh.com.au/business/dollar-rises-against-yen-as-calm-returns-to-markets-20110321-1c3qi.html

The consistency of the Australian dollar against the Japanese Yen means that the global financial market was stabilising after the Japanese earthquake 10 days earlier and the Libyan conflict. The Australian dollar was trading at ¥81.39 yesterday (Monday 21st March), up from ¥77.33 on Thursday.

Global investors have been buying the English Sterling and European Euro on the expectation that the Bank of England (England's equivalent to the RBA) and the European Central Bank would raise rates. This means that investors have been staying away from the US Greenback, due to speculation that the US Federal Reserve would be the last out of all major currencies to rise, which has helped the Australian dollar in the past as it has stayed near parity to the US dollar throughout the last few months.

The VIX Index in America traded above 30 last week when it usually averages about 15-20, another sign that world markets are beginning to strengthen, which means that the Australian dollar will again gain ground of the US dollar- having reached parity today for the first time in a week.

In Commerce we have learnt about how foreign exchange rates affect the Australian dollar, and how other currencies can appreciate and depreciate against the Australian dollar. In recent times the Australian dollar has depreciated against the US Dollar due to global instability but today it has appreciated back to parity. The Australian dollar also has appreciated against the Yen, trading at 1 AUD= 81.39 YEN.

Oil drops, yen gains in wake of Japan's disaster

March 12, 2011, SMH.com.au

http://www.smh.com.au/business/markets/oil-drops-yen-gains-in-wake-of-japans-disaster-20110312-1brsn.html

World oil prices and the economy in the world in general has shaken in the aftermath of the Japanese Earthquake. Australian stocks lost 4.5% in one week, signalling the end of its worst week since May last year. Meanwhile the Japanese Nikkei dropped 1.7% as the Japanese Government pledged financial stability after this earthquake.

Around the world the price of oil has continued to rise hitting US $100 a barrel, and Japanese oil exporters JX Nippon have closed due to the earthquake and resulting tsunami, and their three plants produce 600 000 barrels of oil a day, providing even more pressure on the market that has had trouble in the Middle East currently.

Meanwhile the S&P 500, Bloomberg Europe 500, MSCI Asia Pacific Index have all fallen due to the earthquake.

In Commerce we have discovered that the economy is influenced by overseas pressures that have introduced recessions over the years that had not been begun on Australian shores. In this case oil is one pressure that is driving up prices in Australia and around the world, and combined with the earthquake in Japan it would mean that prices would continue to rise.

Trade boom survives flood shock 3/3/2011, Blog Post 2

3/3/2011

SMH.com.au

http://www.smh.com.au/business/trade-boom-survives-flood-shock-20110303-1bfk3.html

The commodities boom is what is driving the Reserve Bank of Australia to drive up its interest rates (or cash rate as described here). The trade surplus in the past 10 months has reached over $1 billion Australian Dollars and last month's $1.88 billion surplus has exceeded expectations due to flooding and cyclones in Queensland, which in the end was offset by coal exports. The reason why the RBA is holding interest rates despite this data is the fact that Australians are spending less and saving more, even though household incomes jumped by 8.7% last year (in which Australians chose to save).

This shows that the economy is influenced a lot through imports and exports, and that patterns in spending and saving by Australians influences the interest rate. Also the natural disasters in Queensland have lessened the value of exports as coal lost 39 and 32% of their value in the past month. Imports have also dropped in January as there was a 29% drop in fuel imports.

However Australian commodity prices are set to increase as exports earnings are forecast to rise 29% in the year to June 2011, and miners are taking that opportunity to increase their spending so that in the financial year of 2011-12 their spending should reach $76 billion. Because of this spending by the mining sector it should increase exports, wage and tax receipts, and helping the country recover from the GFC.