Factors affecting demand for Australian Dollar?! (1 Viewer)

[SGSII]

Hi guys
Could someone please explain to me in simple terms how the demand for Australian exports links up with the demand for the Australian dollar?
I really don't understand it :S
Any help is good help,
Thanks

 

[Drifting95]

When individuals/businesses etc want to purchase Australian exports they must pay in the $AUD, not there own personal currency. For example, if China wanted to purchase Australian iron ore they would pay in $AUD, not the Yuan. Thus, the demand for exports will influence upon the demand for the $AUD, therefore an increase in exports will lead to an appreciation of the $AUD.

Sorry if its not clear, I'm not exactly teacher material lol.

 

[matt16]

Hi guys
Could someone please explain to me in simple terms how the demand for Australian exports links up with the demand for the Australian dollar?
I really don't understand it :S
Any help is good help,
Thanks

Overseas firms/individuals etc. need to exchange their foreign current into AUD in order to buy Australian exports. When demand for exports is high, this will lead to high demand for the AUD, as more AUD must be bought by overseas importers buying Austrlian goods/services. When demand for the dollar is high, this leads to an appreciation due to supply/demand.

For example, demand is high for Australian mining exports. Overseas firms must transfer their money into AUD in order to pay for our exports, in turn increasing demand for AUD as more people want to buy our currency so they can buy our exports. According to the supply/demand curve, high demand (or low supply) will cause the AUD to appreciate.

Hope this makes sense!

 

[seremify007]

Australian exports are denominated in Australian dollars. When foreigners want to buy it, they need to use AUD to buy it. This pushes up demand for AUD. Similarly, both foreigners and speculators can predict that exports demands will increase in the future and hence AUD will increase in the future, so they can start buying now which also creates demand for the AUD pushing up the value of AUD.

 

[SGSII]

Alrightie, thanks guys!
Helped a lot