Topic: Covid-19 and the Australian dollar

Background: The COVID-19 pandemic is primarily a public health issue, but it is also having a major impact on the economy and the financial system. In response to the pandemic, countries restricted the movement of people across borders and implemented social distancing measures. The result has been major disruptions to economic activity across the world. The primary response to the virus is to manage the health of the population, but other arms of policy, including monetary policy, have played an important role in reducing the economic and financial disruption resulting from the virus. The Reserve Bank is committed to doing what it can to support jobs, incomes, and businesses in Australia.

Reserve Bank of Australia, March 2020 https://www.rba.gov.au/covid-19/

Questions (each question is 7.5 marks)

1) Using publicly available data (for example, from the RBA), explain the performance of the Australian dollar vs the USD dollar (AUD/USD) during the pandemic (2020-2022).

2) Using the theories studied in class on the determination of the exchange rate, please argue which forces were the main drivers of the AUD/USD during the pandemic.

3) Given your analysis in point 2, please explain how useful/useless these theories were in explaining the movements of the Australian dollar (please use tables, figures and/or statistics to prove your point)

4) Using data publicly available data demonstrate the performance of the Australian dollar vs the Euro during the pandemic (2020-2022)