I have an assignment on the the factors which impact the Australian dollar.
"How does the government influence the value of the Australian dollar?"
Check these sites.
http://www.google.com/search?hl=en&ie=ISO-8859-1&q=Australia+dollar+government
To understand how the government influences the value of the Australian dollar, you need to consider a few factors:
1. Monetary Policy: The government can influence the value of the Australian dollar through changes in monetary policy. The Reserve Bank of Australia (RBA), which is the country's central bank, can adjust interest rates. When the RBA raises interest rates, it typically attracts foreign investors who seek higher returns on their investments, which can strengthen the Australian dollar. Conversely, if the RBA lowers interest rates, foreign investors may withdraw their investments, causing the Australian dollar to weaken.
2. Fiscal Policy: The government's fiscal policy, involving taxation and government expenditure, can also impact the Australian dollar. For example, if the government increases government expenditure without raising taxes, it may lead to a budget deficit. To finance this deficit, the government may issue bonds, which can attract foreign investors and increase demand for the Australian dollar, thus strengthening it. Conversely, budget surpluses can reduce the supply of bonds and potentially weaken the Australian dollar.
3. Intervention in the Foreign Exchange Market: Governments can directly intervene in the foreign exchange market by buying or selling their own currency to influence its value. If the Australian government intervenes by selling Australian dollars, it increases the supply of its currency, leading to a potential depreciation in its value. Conversely, if the government buys its own currency, it reduces the supply in the market and may lead to an appreciation.
4. Economic Policies and Reforms: The government's broader economic policies and reforms can also impact the value of the Australian dollar. For instance, policies that attract foreign investors or stimulate domestic economic growth can contribute to a strong Australian dollar. On the other hand, policies that discourage investment or hinder economic growth may weaken the currency.
To further enhance your understanding, you can refer to financial news sources and research papers that analyze the government's role in influencing the Australian dollar. Additionally, studying the RBA's monetary policy decisions and the government's fiscal initiatives can provide more insights into how they impact the currency.