Part (a) The current Australian foreign exchange value? at equilibrium is 0.7 US dollar ($US) per Australian
Question:
Part (a) The current Australian foreign exchange value? at equilibrium is 0.7 US dollar ($US) per Australian dollar. What will happen to the Australian foreign exchange value? in the two following different scenarios?
a.1. This year, the inflation rate in Australia is higher than the inflation rate in the United States. Please elaborate your answer using the concepts of the demand curve for Australian dollars and the supply of Australian dollars.
[2.5 marks]
a.2. Before the COVID-19 pandemic, every year there were many more Australians travelling to the United States than there were Americans travelling to Australia. Due to the Covid-19 pandemic, all international travel has been cancelled. Please be elaborate in your answer using the concepts of the demandcurve for Australian dollars and the supply of Australian dollars.
[2.5 marks]
Part (b) Assume that a speculator anticipates that the spot rate of the franc in three months with be higher than today's three-month forward rate of the franc, $0.50=1 franc. How can this speculator use $1 million to speculate in the forward market? Please elaborate your answer. [5 marks]
no information is missing information