PART B
Exchange rates for different countries depend on numerous factors. The performance of the exchange rate for US Dollars to the Australian dollar shows an upward trend. The level of the increase shows by the trend is minimal. The minimalism is due to many fluctuations that don’t have any consistent sense of direction. To analyze, the trends in the stock exchange especially for dollars against any currency, it is important to recognize the years 2001 and 2008 when there were huge changes in the economy of the United States. On close observation of the exchange form the graphs, it can be seen that increasing trends emanated from those time periods. During, these time periods the rate of decrease in the exchange rates is very high. In 2008, the economy of the USA took a hit from the economic recession that resulted. However, policies that were adopted after 2008 led to an increase in the exchange rates for a period of about five years. After 2013, the foreign exchange rates have been on the decline.
Exchange rates are not solely set by the Central bank. Instead, with the use of financial indicators, the prices of the US dollar can be determined. One of the economic indicators is the real growth GDP. The real GDP is compared to both Australia and the United States. From observing the graph on the trend of performance of the GDP of the United States, sharp decreases are recorded in the time period between 2008 and 2010. The decreases took the GDP into negative values. Observing the trend line for the GDP of Australia, there exist no trends. However, cyclic variations exist. After 4 years, the GDP of Australia increases. The GDP of Australia is also on a decline in the time period between 2008 and 2010. However, during the time period between 2000 and 2002, the GDP of the US was on a steady decline up to the closing months of 2020 where the increase started. The GDP for Australia was also on a decline during the time period, however, the increase in their GDP started in the closing months of 2001. The GDP of Australia is higher than that of the US.
The average nominal interest rates are also indicators of the performance of the economy. From observing the trend line for both nominal interest rates in the US and Australia, the interest rates in Australia have always been greater than those in the US for the period after 2002. The interest rates were on an upward trend for the time period between 2002 and 2008. In the time period after 2009, the trend of the nominal interest rates in the US dropped drastically to levels below 1%. Since then, the interests have not taken any significant trend to suggest a substantial decrease or increase. The period after 2009 indicates a significant decrease and increase indicating no trend for interest rates in Australia. The lowest interest rates in Australia have reached just above 2%.
Another economic indicator that is used to determine the worth of a country’s currency is the average price of commodities. The average price of commodities has been going up. The shift in prices of commodities is a repercussion of economic happenings such as increased levels of inflation. For the time period between 1990 and 2004, shows small fluctuations in commodity prices. The period after 2004 shows a sharp decline and increase the prices of commodities. The growth after 2004 is exponentially leading to very large fluctuations. The period between 2006 and 2010 show a sharp increase in the prices of commodities. This about the same time the US economy was facing a recession. However, after this period the prices decline steeply.