Marketing for Forex Market of Australia -myassignmenthelp.com

Question: Discuss about theMarketing for Forex Market of Australia. Answer: The foreign exchange market of Australia has witnessed huge growth rate in the past years. The foreign exchange market in Australia is the seventh largest market in the whole world. The Australian dollar is the sixth largest traded currency but in the international market. The growth of Australian foreign exchange market is at par in the entire forex market. The share of Australian foreign exchange market has decreased from the past few years. The tariff rate of Australia was lowered so as to allow free trade. This paper will highlight the role of inflation rate and the interest rate in the foreign exchange market of Australia. There were certain new rules which were implemented by the Australian Taxation Office for the determination of foreign exchange policies in Australia. Inflation rate in the Forex Market of Australia Inflation rate and exchange rate of a country are closely related to each other. The inflation rate in Australia was expected to be 1.90 percent by the end of September, 2017. But the inflation rate in Australia stands at 2.20 in the previous quarters. It is also projected to be 2.20 by the end of 2020. There must be much more intervention in the inflation rate so that it might affect the exchange rate. When the inflation rate is soaring, the central bank of Australia will raise the interest rate so that there is slowdown in the economy and the inflation can be brought down at an acceptable range. The Australian exchange rate became flexible during the mid of 1970s. The crawling peg in the exchange rate involved several adjustments in the level of exchange rate. There were also devaluations and revaluations in the exchange rate policy of Australia. The fixed exchange rate policy of Australia made it hard to manage the money supply. The targeted growth in the supply of money is known as monetary targeting and this is followed in Australia. The floating exchange rate policy of Australia has benefited the economy to a large extent. It has provided a barrier against the external shock in terms of trade and thus the economy absorbed the inflationary and the deflationary pressure which affected the exchange rate regime. It also affected the output volatility during the past few years and thus this allowed the Reserve bank to set the monetary policy accordingly (Pagan Wilcox,2015). Interest Rate in the Forex market of Australia As the economy of nation grows over time, the prices of the goods also tend to rise and the consumers are able to spend more of their income. If the interest rate goes drastically high, the borrowed money also becomes expensive. The Central bank of Australia tries to foster growth in the economy by keeping the inflation rate low. In 2009, the credit of United States began to thaw as the economy was bottoming out. In such a situation, The Reserve bank of Australia began increasing their targeted benchmark rate. This led to economic expansion and the foreign investors in Australia needed more Australian dollars to make more investment. The foreign exchange dealers also purchased the Australian and the US dollar in pair and thus this led to anticipated demand of the Australian dollar. The traders earned an additional dividend of 30% when the foreign exchange of Australia has risen. The foreign investors are thus finding less attractive to invest in the Australian economy and they will m ove the fund in other countries to yield better returns (Engel, 2013). Australia is a wealthy economy and it is dependent on the mining and agriculture industry. The non competitive cost and the higher interest rate have made it difficult for the Australian economy to compete with the other countries. This has led to lower demand of Australian demand. The discretionary changes which were made in the Australian dollar in various regimes have made it difficult to offer an efficient barrier against the shocks. This shift in the floating exchange rate of Australia has also contributed to the decline in volatility in the past few years. This has also allowed the Reserve bank of Australia to set the monetary policy of the country a d it will also favor domestic conditions. References Engel, C. (2013).Exchange rates and interest parity(No. w19336). National Bureau of Economic Research. Pagan, A., Wilcox, D. (2015). External ReviewReserve Bank of Australia Economic Group Forecasts and Analysis.report to the Reserve Bank of Australia.