9. Exchange rate movements [LO 21.3] Some countries encourage movements in their exchange rate relative to those of some other country as a short-term means of addressing foreign trade imbalances.

For each of the following scenarios, evaluate the impact the announcement would have on an Australian importer and an Australian exporter doing business with the foreign country:

1. Officials in the Australian Government announce that they are comfortable with a rising euro relative to the dollar.

2. British monetary authorities announce that they feel the pound has been driven too low by currency speculators relative to the Australian dollar.

3. The Brazilian Government announces that it will print billions of new reals and inject them into the economy in an effort to reduce the country’s unemployment rate.