e cash rate in Australia is a benchmark interest rate which is set by the Board of the Reserve Bank of Australia and has recently been at a record low. (a) If the cash rate were to increase, would you expect the Australian dollar to increase or decrease against most other currencies? Explain your answer. (b) If the cash rate were to decrease, would you expect the Australian dollar to increase or decrease against most other currencies? Explain your answer. (c) Explain why the cash rate is not expected to increas

e cash rate in Australia is a benchmark interest rate which is set by the Board of the Reserve Bank of Australia and has recently been at a record low. (a) If the cash rate were to increase, would you expect the Australian dollar to increase or decrease against most other currencies? Explain your answer. (b) If the cash rate were to decrease, would you expect the Australian dollar to increase or decrease against most other currencies? Explain your answer. (c) Explain why the cash rate is not expected to increas

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates

Section: Chapter Questions

Problem 6ST

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If a central bank decreases interest rates, then gradually: a. the country's gross domestic product is likely to decrease. b. foreign exchange rate is likely to appreciate. c. demand for exported goods and services is likely to increase. d. flows of investment funds into the country are likely to decrease.
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If US dollars gets lower interest rates in the United States. How would this affect a fundamental forecast of foreign currencies? How would this affect the forward rate forecast of foreign currencies?
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Monetary policy in Australia is implemented by the Reserve Bank, and currently is principally directed towards: A: affecting the level of short-term interest rates B: effecting a reduction in the current account deficit C: affecting the level of growth in the money supply
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1.Assume that the yen is selling at a forward discount in the forward-exchange market. Then, most likely a . interest rates are declining in Japan. b . this currency is gaining strength in relation to the dollar. c . interest rates are higher in Japan than in the United States. d . this currency has low exchangerate risk.
The following graph depicts the foreign exchange market for the euro. The demand for euros is represented by the blue line, while the supply of euros is represented by the orange line. Suppose that the federal reserve of the United States wishes to lower the value of the euro relative to the dollar. Shift either the supply curve or the demand curve to reflect the monetary policy that the Fed is likely to enact if it uses direct intervention. VALUE OF EURO (Dollars per euro) QUANTITY OF EUROS S D D S