How the Falling U

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How the Falling U.S. Dollar Exchange Rate May Affect Australias Economic Outlook Something is wrong There is an increasing sound of concern in the Global Markets about it that there is surely something which isn’t right at all. But what is it What all can it be at all Well the increasing concern from in the global markets is of the global investors who believe that there is something wrong the way Australian economy is working. The investors from the market discussed stating that the Policy is in a not so useful phase. Low Income/wages of the people a sharp fall in wealth as house prices drop the share market is expectedly is weakening as in the recent months the U.S. dollars exchange rate has fallen against most of its trading partners that also included the Australian dollar Rates. For countries such as the U.K. that are a net importer of goods the falling USD exchange rate has a tough hand in reducing the sterling price of imports. Although all this can benefit the U.S. businesses but for Australia the net exporter of goods priced in U.S. dollars the effect isn’t that positive. Even after the recent diversification the economy of Australia remains dependent on the export-led. Being one of the worlds premier exporter of iron ore and a major exporter of coke Australia also produces a large range of manufacturing and agricultural products that are largely produced for the purpose of export. Thus the sound of problem rings a bell here. Wondering why Well it should beknown that the economies that are generally export-led can be very vulnerable to the terms of trade shocks: for instance if the international market prices of exports fall the incomes of exporters will also fall causing a financial distress to businesses households and even to governments. Thus a rising exchange rate might also mean lower inflation for the Australian economy. So as per the calculations of the output done by the economists it can be expected that all this can be lowered by ½–1 per cent within a speculated duration of two years time.

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Sanctioning that in any case if the inflation and output fall due to the continuous appreciation of the Australian dollars exchange rate the RBA will eventually be forced to cut the interest rates further. However the happy bells don’t jingle for long they can’t isn’t it As per the latest news trends it was observed that the dollar is ready to take another hit on the back of this change in the forefront of the official view. Suggested that this will also impact the value of the Australian dollar that will be increasing the weighty problems in the different economies especially Chinese. As it is seen that China takes around one-third of Australia’s merchandise exports it’s consuming potential makes it a vital part of any assessment of the economy and the Australian dollar. One should know that the economies of the US eurozone and Japan are also slowing and registering worryingly low inflation particularly in the context of how stimulatory monetary policy has been for a decade or more. In simple terms the Australian dollar tends to be strong when the global economy and local economic growth is strong and it tends to fall in times of economic weakness.

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