With a floating exchange rate, such as Australia's, supply and demand factors largely determine the dollar's equilibrium price. The exchange rate is sensitive to changes in both demand and supply, which can cause changes in the equilibrium exchange rate. Another factor, which can affect the supply and demand of Australian dollars, is intervention in the market by the Reserve Bank of Australia.
DEMAND
The demand for Australia's currency in the foreign exchange market (Forex) is a derived demand. It is derived from the demand for a country's exports of goods and services and its assets.…
