FACTORS AFFECTING SUPPLY AND DEMAND OF AUSTRALIAN DOLLARS

With a floating exchange mark, such as Australias, provide and demand factors largely determine the dollars equilibrium price. The exchange rate is sensitive to changes in both demand and supply, which can dress changes in the equilibrium exchange rate. Another factor, which can take the supply and demand of Australian dollars, is intervention in the merchandise by the Reserve Bank of Australia.

DEMAND

The demand for Australias currency in the foreign exchange market (Forex) is a derived demand. It is derived from the demand for a countrys exports of goods and services and its assets.

In simple terms, people who may have a demand for the Australian dollar could include:

Foreigners requisiteing to barter for Australian exports

International tourists visiting Australia

International intrustors wishing to purchase Australian sh ares or property

International firms setting up branches or expanding in Australia

Speculators and investors who think the appraise of the Australian dollar depart rise in swear of making a profit.

The demand for the Australian dollar will be collide withed by a number of factors. These factors are:

The Size of financial flows into Australia The size of financial flows into Australia from investors who wish to invest in Australia and need to convert their currency into AUD will affect demand for the dollar.



The level of capital inflow will be affected by the level of Australian interest evaluate relative to overseas interest rates as hygienic as the level of confidence in the Australian economy. If Australia has relatively higher interest rates and stronger confidence, then this will support capital inflow and increase demand for the AUD. Using this theory, the Australian dollar at the present looks to be in a relatively strong position. Interest rates are set about to rise (official interest rate has recently been risen 0.25 points to 4.5% and is expected...

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