The following two economic events impact on the value of the Australian dollar in the foreign exchange rate market.

-Speculators believe that the price of Australian exported commodities (iron ore, coal) will increase resulting in increased trading in the AUD by currency traders / speculators.

-At the same time Australian households and firms purchase less imports.

REQUIRED:

Explain the effect of the above economic events on the demand for and supply of Australian dollars and the change in the value of the Australian dollar (AUD) in the foreign exchange rate market (Note: a diagram is not required for this question).