HELP! CSSA Trial (1 Viewer)

[bradwow]

There were questions in the trial that I got wrong and I still dont know the answer to. Please please tell me the answer, and it may even help you too.


Briefly explain why an exchange rate may move in the opposite direction the TWI.

Outline TWO methods that the RBA could use to influence Australia's exchange rate.



Please please!!!

Thank you

 

[karnage]

Briefly explain why an exchange rate may move in the opposite direction the TWI.

Outline TWO methods that the RBA could use to influence Australia's exchange rate.

exchange rate - value of a currency in terms of another currrency (e.g. US)
twi - value of a currency against basket of major trading partners
therefore, a country's exchange rate may appreciate against another currency, its exchange rate against a basket of its major trading partners may appear to depreciate. vice versa

two methods rba can use
- dirtying the float: using foreign currency reserves to buy the $A, acting as a buyer/seller in forex market
- raising interest rates: attracting foreign investors who demand the $A causing it to appreciate

 

[bradwow]

wow i understand completely now thanks so much