reserve bank of australia historical foreign exchange rates

reserve bank of australia historical foreign exchange rates/reserve bank of australia foreign exchange rates/reserve bank of australia monetary policy

reserve bank of australia historical foreign exchange rates: dollar bonds into the Australian market; reserve bank of australia foreign exchange rates residents issuing Australian dollar bonds into offshore markets; and non-residents issuing Australian dollar bonds into offshore markets.

reserve bank of australia foreign exchange rates

An important precursor to these markets was the development of the domestic Australian government bond market. This market grew quickly from the early 1980s, after the authorities adopted the general principle that investors should be able to have full confidence that the return
they would earn on their government bond investments would be purely market-determined.

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Like many other countries, in the postwar years Australia had a range of regulations on the bond market, including the direct setting of bond yields and requirements on some investors to be captive holders of bonds. These were aimed at keeping down the cost of debt, but the distortions they created also prevented a secondary market from developing.

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When the government removed those controls in the early 1980s and moved to an auction system for issuing debt, it was initially required to pay very high real yields on its debt issues. But the openness and transparency of the arrangements quickly established the government’s credibility. Demand for bonds increased, including on the part of offshore investors, and yields fell noticeably in the first year after the arrangements were adopted.

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Once a risk-free government yield curve had been established, the way was open for transparent pricing of bonds by other issuers. The combination fa deregulated bond market. and a floating exchange rate with no capital controls in turn allowed development of the cross-currency swap market.

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Since this market allows investors and issuers to mix and match credit risk, currency risk and interest rate risk in any desired combination, it provided a very
significant boost to market activity by both domestic and foreign issuers and domestic and foreign investors.

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The Australian dollar bond market is now highly internationalised, although not as much as the Hong Kong dollar, New Zealand dollar, Swiss franc, pound sterling or euro (McCauley (2006)). Table 2 shows that, as at late 2008, about 50% of outstanding Australian bonds were issued offshore, about 60% were held by non-residents and about 40% were issued in
foreign currency (and hedged back to Australian dollars).
Issuer
CGS
State
governments
Financials
Corporates
ABS
Non-resident
Total
Source: ABS, RBA.
206
4.
Table 2
Bonds issued by Australians or in Australian dollars
In billions of Australian dollars, September 2008
Total
outstanding
59
6
114
399
120
182
135
1,009
Location of issue
Domestic Offshore Domestic Offshore
59
77
121
50
112
80
499
more Readers
0
36
278
71
70
55
510
Figure 2
Australian Dollar Volatility
Abackute monthly percentage change against US dollar
Fixed Managed
Floating

6
64
106
37
76
43
350
2009
24

exchange rates 2023

The implications of an internationalised currency
3.5
3.0
2.5
Location of
investor
20
1.5
1.0
0.5
35
50
293
84
106
92
660
(a)
Financial markets
Exchange rate volatility has been considerably higher in the post-float period, although, of
course, the large discrete changes in the exchange rate which occurred in the fixed rate
regimes, reflecting the occasional large realignments, no longer occur (Figure 2). Arguably,
market participants found the latter to be more damaging than short-run volatility, since
discrete administered changes are hard to predict and difficult to hedge against. Market
participants readily adjusted to the increased short-run volatility, partly because, as noted,
they had honed their trading skills in the non-deliverable forward market. Over time, there
has been a widespread move to increased use of hedging by Australian corporations and
financial institutions.
0.0
While there was an increase in the volatility of the exchange rate, the volatility in nominal
interest rates declined (Figure 3). In turn, this contributed to less volatility in the
macroeconomy (Simon (2001)). This development is not unique to Australia (Blanchard and
Simon (2001)). Not all of this was due to the new exchange rate arrangements. Other
economic reforms have also contributed, including those in the product and labour markets,
as well as improvements to the policy frameworks for both fiscal and monetary policy (Gruen
and Stevens (2000)).
By currency
AUD
59
113
137
51
113
1973
1979
E-months merage
Sources: RBA; Thonor Re
135
608
Non-AUD

0
1
262
69
69
0
1997
401
BIS Papers No 61
Figure 3

reserve bank of australia monetary policy

Australian Interest Rate Volatility
Absolute monthly percentage point change in 90-day bank bill
Fixed Managed
Floating
2003
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2000
As might be expected, internationalisation has increased the relative influence of offshore
factors on domestic markets. Campbell and Lewis (1998) demonstrated that Australian bond
yields are more affected by US economic news than Australian news. In terms of the
Australian dollar, Clifton and Plumb (2008) show that volatility in the AUD/USD increases
around the times of key US economic data releases.
The impact of US news on the AUD/USD is not always predictable. Conventional theory
would suggest that negative economic news in the United States should lead to an
appreciation in the Australian dollar relative to the US dollar, all else equal. For example, a
weaker than expected US employment report would generally be expected to put upward
pressure on the AUD/USD, due to its positive effect on expected Australia-US yield
differentials However because weak US data can also have negative implications for global

Figure 5
Terms of Trade and Consumer Price Inflation
Index
CPI
(Year-ended percentage change, RHS)
150
125
100
75
210
50
N
Terms of trade
(2006/07 100; LHS)
* Excluding interest changes prior to the September quarter 1998 and add
for the tax changes of
Source: ABS; RBA
The relationship between the floating exchange rate and terms of trade is, of course, not
precise. There have been periods when the exchange rate has moved away from a range
that might be considered consistent with economic fundamentals at the time. One such
example was in the late 1990s. At that time, Australia’s terms of trade were rising, but the
nominal and real exchange rates declined substantially. Part of this decline reflected the
large appreciation of the US dollar at the time, as there was a global portfolio shift towards
investment in technology stocks at the expense of so-called “old economy” stocks prevalent
in Australia.

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Attempts to find a role for variables other than the terms of trade in explaining movements in
Australia’s real exchange rate have generally proven less successful. At times interest
differentials have had an important role, and at various times the stock of foreign liabilities,
the current account balance or growth rate differentials have also been found to be
influential. In part, the changing influence of some of these variables reflects the varying
focus of financial market participants.
In addition to counterbalancing the influence of external shocks, the exchange rate has had a
direct influence on inflation. This is in contrast to experience with the fixed exchange rate
regimes, under which Australia directly “imported” the inflation rate of the country (or group of
trading partners) to which the exchange rate was pegged. Over time, however, the direct
influence of the exchange rate on inflation has waned; the pass-through of exchange rate
changes to consumer price inflation, through changes in the prices of tradable goods and
services, has become considerably lower (Heath et al (2004)). This phenomenon is not
unique to Australia. It has also occurred in the United Kingdom, Brazil, Chile and the United
States, inter alia. One consequence of this reduced pass-through of exchange rate changes
to inflation is that the Reserve Bank has become more tolerant of exchange rate variations
and less inclined to intervene in the foreign exchange market.
Two episodes highlight the role that the exchange rate has played in macroeconomic
adjustment in the post-float period in Australia. The first occurred in the mid-1980s as the
terms of trade declined by around 15% between March 1985 and March 1987. A sizeable
depreciation of the exchange rate of around 40% over the same period was linked to the
terms-of-trade decline and was concentrated in two large movements in February 1985 and
July 1986. The depreciation was sizeable in both nominal and real terms, and the exchange
10 See, for example, Blundell-Wignall et al (1993), Tarditi (1996) and Beechey et al (2000).
BIS Papers No 61
rate arguably overshot the new equilibrium. Inflation did increase, but not to the extent that
had occurred when the exchange rate had devalued under the fixed rate regimes. The real
depreciation served to counter the impact of the decline in the terms of trade and provided a
boost to the tradables sector and a substitution towards domestic production. Perhaps most
importantly, the general sense of crisis created by the falling Australian dollar was an
important catalyst for the range of reforms to the economy, particularly labour and goods
markets. These helped set the scene for the much better performance of the Australian
economy over the subsequent couple of decades.
A second episode involved the rise in the terms of trade between 2003 and 2008.

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The net
rise in the terms of trade over this period – 65% – was the largest since the boom in wool
prices in the early 1950s. Between 2003 and mid-2008, the exchange rate rose by about
40% in trade-weighted terms, the largest cumulative appreciation in the post-float period.
This sharp rise helped to dissipate the inflationary pressures on the Australian economy that
came from the terms of trade. Whereas in the 1950s inflation rose to a peak of over 20%, in
the latest episode inflation peaked at 5%.
(c) The balance of payments and capital flows
Under a fixed or managed exchange rate, the authorities have some degree of influence over
composition of the balance of payments as between the current account balance and the
capital account balance. For example, they can directly change the level of the exchange
rate or they can encourage or repress capital flows through various controls.
This capacity does not exist with a floating exchange rate and an internationalised currency.

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While a floating exchange rate will precisely equilibrate the balance of payments, it leaves
the authorities with no direct influence over its composition between the current account and
the capital account. This can be illustrated by the case of Australia.
In the 25 years before the floating of the currency, Australia’s current account averaged a
deficit of about 2.5% of GDP. This was matched by net capital inflows of similar magnitude,
made up of gross inflows of about 2.5% of GDP and negligible outflows. The absence of outflows was the consequence of tight capital controls, introduced during the Second World
War, designed to prevent scarce domestic savings from leaving the country.
The removal of capital controls when the currency was floated in 1983 saw capital outflows
surge. But, within a relatively short period of time, capital inflows increased even more. On
balance, foreign investors were attracted by the changes to the economy that followed the
liberalisation of exchange arrangements. In the 25 years since the float, net capital inflows
have averaged 4.5% of GDP (Figure 6).

What is the exchange rate of Australian dollar RBI?
Australian Dollar to Rupee Exchange Rate Live 1 AUD to INR = 53 (Convert Australian Dollars to Rupees)

What is the best rate of Australian dollar to Indian rupees
53.92 INR
1 AUD = 53.92 INR

What is the RBI rate for AED to INR?
Dirham to Rupee Exchange Rate Live 1 AED to INR = 22

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