Exchange Rates PPT 1 Flashcards
What is an exchange rate?
It’s the value of one country’s currency in terms of another country’s currency.
Why are exchange rates important?
They allow international trade and transactions between countries with different currencies.
How do you convert from USD to AUD if 1 AUD = 0.69 USD?
1 USD = 1 / 0.69 = approx. 1.45 AUD
A German car part costs €250. How much is that in AUD if 1 AUD = 0.62 Euros?
$403.23 AUD (250 ÷ 0.62)
What is the Trade Weighted Index (TWI)?
A basket of currencies weighted by their importance in Australia’s trade.
Why is the TWI useful?
It reflects overall changes in the AUD more accurately than single currency comparisons.
Why is the Chinese renminbi weighted more than the Indian rupee in the TWI?
Because China has a higher trade volume with Australia.
What happens to the TWI if the AUD depreciates against major trade currencies?
The TWI will likely show a depreciation.
How often are TWI currency weights updated?
Usually every year..
