And while you may think that a low Aussie dollar is all bad, it can actually have some positive effects for foreign trade at the same time.
Evans 2 Introduction Sincethe US dollar has fallen or weakened by as much as 35 percent against the European euro and 24 percent against the Japanese yen Chipello ; Sanger The weakening US dollar is very much talked about, but should farmers in general and those in Florida in particular really care?
Is the falling US dollar good, bad, or indifferent for the growers and agribusinesses in the South? This publication explains the concept of fluctuating currency exchange rates, defines common terms used such as strengthening or weakening of the dollardiscusses factors that determine the exchange rate, considers the potential implications of a weak US dollar on US and South Florida agriculture in general, and makes a few suggestions regarding what farmers and agribusinesses can do to protect themselves from currency fluctuations.
What is the exchange rate and why is it important? The exchange rate is simply the price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another.
It should be noted that these exchange rates change on a daily basis; therefore, the rates used here are only for illustrative purposes. The actual rates can be found online at the Federal Reserve Board's website http: In general, the price difference between similar goods determines which goods are traded and where they are shipped or sourced.
Hence, the exchange rate is a significant factor influencing the competitiveness of agricultural commodities and the profitability of farming enterprises.
Who or what determines the level of the exchange rate? A wide range of factors interact to determine the exchange rate level: While a discussion of the relationships among these factors is beyond the scope of this publication in fact some of these relationships are still unknownthe discussion can be simplified by focusing on the two main factors influencing the level of the exchange rate: How does the government and market forces influence the rate level of the exchange rate?
Governments can influence the level of the exchange rate directly or indirectly. Governments influence the exchange rate level directly by setting "fixed" exchange rates. This means that the rates stay at the same value until such time as a government sees fit to change them.
For example, sinceChina has fixed pegged its exchange rate relative to the US dollar at 8. Governments influence the exchange rate level indirectly by changing interest rates the amount of money in circulation or by purchasing other currencies on foreign exchange markets the place where different currencies are bought and sold.
In addition, many countries, including the United States, Japan, and Canada, set "flexible" or "floating" exchange rates that change on a daily, or even hourly, basis, depending on currency demand and supply.
Figure 1 illustrates how the US dollar exchange rate for the European euro changed over the period to The downward sloping curve indicates a weakening of the US dollar. US exchange rate of US dollar versus euro, — Compiled by author with data from Federal Reserve Board [Click thumbnail to enlarge.
This would strengthen the value of the US dollar in that you would receive more yen in exchange for your dollar. An increase in the demand for a country's currency on the foreign exchange market usually increases the value of its currency, too.
For example, increased demand for US exports would translate into a stronger US dollar because other countries would be demanding more US dollars in order to pay for these commodities and services. Likewise, foreigners wishing to invest in the United States or to repay debts owed to the United States would cause the demand for US dollars to increase, which would result in the appreciation of the US dollar.
Of course, the converse is also true. Factors that increase the supply of or decrease the demand for a country's currency on the foreign exchange market tend to cause the exchange rate for that currency to weaken or lose value. Such factors include the desire of US consumers and businesses to purchase foreign goods and services, or to transfer or repay debts owed outside the United States.
What are the impacts of changes in the exchange rates?May 16, · The U.S. dollar's long-term value is dependent on many factors, and the election year may just provide a few obstacles in the road rather than a complete change of course.
A market-determined increase in the dollar price of the pound is associated with: a. Revaluation of the dollar To temporarily offset an appreciation in the dollar’s exchange value, the Federal Reserve could Exchange-Rate Systems.
Chapter Exchange-Rate Systems system. Chapter Exchange-Rate Systems A regression analysis of the Australian dollar value on the inflation differential between the U.S.
and Australia produced a coefficient of Thus, for every 1% increase in the inflation differential, the Australian dollar is expected to depreciate by.8%. If the Australian dollar falls in value, or depreciates, our exports become cheaper and imports become more expensive – again affecting profitability • Exports – the people outside of the country purchase these.
Imports – the stuff we buy. Jan 20, · Tips For Cleaning Coins: How To Clean The Old, Dirty Coins In Your Collection I just want to start off by saying that, as a collector, I do not condone coin cleaning. In almost all cases, cleaning a coin will decrease its value. Yesterday, the value of the Australian dollar was $ The Australian dollar ____ by ____%.
(Points:1) appreciated; depreciated; appreciated; depreciated; Assume a two-country world: Country A and Country B.