Exchange Rate

Recent Trends in the Exchange Rate

Topic Menu
Content Contributors
Christian Bien Portrait_edited.jpg

Christian Bien

Learning Objectives

tutorial.png

one.png
Recent Movements in the Exchange
Slide1.jpeg

Data Source: Reserve Bank of Australia, Exchange Rates (July 2021). 


The above chart shows the recent trends in the exchange rates between Jan 2000 to July 2021 (blue) as well as the commodity price index during this time (red). Below shows the notable movements in the exchange rates.

two.png
Pre-GFC Boom (Appreciation)
Slide2.jpeg

Australian Dollar reached a peak of $0.98 USD. Appreciation mainly due to increases in world economic growth increasing demand for Australian exports. During this time, the RBA Commodity price index reached a peak of around 135.

two.png
Global Financial Crisis (Depreciation)
Slide2.jpeg

Australian dollar depreciated from $0.98 USD to $0.63 USD (a decrease of 36%). Depreciation mainly due to decreases in world economic growth and increased global uncertainty, decreasing demand for Australian exports - in particular, prices for commodity exports fell sharply as shown in the RBA commodity price index which fell from 135 to 90.

two.png
Mining Investment Boom (Appreciation)
Slide2.jpeg

Australian dollar appreciated from $0.63 USD to around $1.10 USD (an increase of around 75%) Appreciation mainly due to Chinese economic growth increasing demand for Australian commodity exports. International capital flows diverted into Australia to capitalise on high commodity prices and the state of Australia's growing economy while other major economies were still recovering from the GFC. The increase in exports and foreign investment increased the demand for the currency, causing an appreciation. Supply of the currency also slightly increased as foreign investment was used to finance capital imports, an increase in a debit transaction.

two.png
Post Mining Boom (Depreciation)
Slide2.jpeg

Australian dollar depreciated from $1.10 USD to $0.72 USD. Depreciation mainly due to the slowdown in Chinese economic growth, decreasing demand for Australian commodity exports and slowing foreign investment into Australia. Lower exports and lower foreign investment has decreased credit transactions and hence demand for the currency, causing a depreciation.

two.png
COVID-19 Pandemic
Slide2.jpeg

Despite a surge in commodity prices past 140, the exchange rate has failed to appreciate significantly, rising from a trough of 0.62 USD to around 0.74 USD. This increase has not been significant alike previous increases, potentially due to the economic growth of other major economies such as China, United States and Europe upon the exit of COVID-19.

two.png
Slide2.jpeg
two.png
Slide2.jpeg