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Government intervention in exchange rate

Since 1983, Australia has had a floating exchange rate. Under this system, exchange rates are determined by the free market forces of supply and demand.The Reserve Bank of Australia (RBA) may undertake foreign exchange market operations when the market threatens to become excessively volatile or when the exchange rate is clearly inconsistent with underlying economic fundamentals. Initially, the Reserve Bank of Australia was not intended to intervene in the market however since then it has been deemed necessary for intervention to take place, usually to prop up the price. These operations are invariably aimed at stabilising market cond...

Posted by: Anthony Pacella

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