International Finance

Ch: 4-Exchange rate movement in recent months

AUD per USD
BDT per USD
Month
Rate
% change
Rate
% change
Sep-13
0.9303

76.3765

Oct-13
0.9519
0.023218317
76.2753
-0.00132501
Nov-13
0.9324
-0.020485345
76.4057
0.001709597
source: foreign exchange rate,(dec 2, 2013)

The above currencies are showed in the indirect quotations reflects the average rates of exchange rate. The Bangladeshi taka and Australian dollar are here showed against the US dollar to measure the currency appreciation or depreciation of USD against the foreign currency. In the month of November we can see that for 1 USD we have the indirect rate of 76.4057 BDT. This shows that from the previous month October, the USD appreciated. This also tells that the BDT is depreciated in value against USD and the amount is the highest against the USD in the last 3 months. Therefore we can say that the BDT grown weaker in the month of November. On The other Hand USD indirect rate for AUD is less than the previous month. This signifies that the AUD value is appreciated where the dollar value is depreciated against the AUD. But the rate in the month of September 2013 was the lowest in amount which means in the month of September the AUD was stronger than the other two month. But in the recent month perspective it can be concluded that the Australian currency is appreciated and getting stronger against USD.

Reason for Appreciation or Depreciation:
The reason for any country exchange rate to appreciate or depreciate is totally depend on the supply and demand of loanable funds, inflation and interest rate. In the recent month November the BDT depreciate against US dollar, and this can be caused because of the rising inflation which decrease the BDT value. In the month of November the inflation rate was 7.15% which was increased from the last month October which having Inflation of 7.03%. (Bangladesh Beauro of Statistica)

Where the AUD appreciate against USD, and possible reason might be the decrease in the rate of inflation which was decreased by .02% in the month November from the last month according to the Australian Bereu of Statistics.

There might be other reason like the increase or decrease in the interest rate change in relation with the change of US interest rate.
Movement of Asian currencies:

For the analysis of currencies movement of Asia subcontinent with the US dollar we took the Indian currency, rupee, Japanese currency, yen, and Malaysian currency Ringgits. Because in the Asia these currency are more dominating across the globe. From the general consideration we can see that in the last one year the most volatile currency against dollar was Indian rupee and less frequent movement was seen in the Japanese yen; reason might be the strong monetary policy, less interest rate movement and very little inflation for less movement and vise versa for the Indian rupee.
Analysis:

china
India
Malaysia
China
1

India
0.386097
1 Malaysia
0.515962
0.781826
1
Fig: co-relation of the currency movement
To see the Asian currency movement with the Dollar the co-relation measurement is used by calculating the changes over currency movements from the last 1 year. (Calculation is showed in the appendix ). From the co-relation we can conclude that all the three Asian currencies are move in the same direction along with the dollar movement. But the sensitivity of the currencies are different. We can see that the Indian currency move very positively and more aggressively with the dollar than the other currencies. All the three currencies are having positive co-relating along each other and the currencies are all quoted in direct exchange rate positive movements of the currencies showing they are move in the same direction with dollar changes.
Movement of Latin American countries:

For the analysis of currencies movement of Latin America with the US dollar we took the Brazilian real, Venezuelans Bolivar and Mexican currency Ringgits. Because in the Asia these currency are more dominating across the globe. From the general consideration we can see that in the last one year the most volatile currency against dollar was Mexican peso and less frequent movement was seen in the Bolivar. The bolivar is strictly controlled by the government of Venezuela thus the rate is not a floating one.
Analysis of movement:

brazil venezuala mexico brazil 1

venezuala
-0.30739
1 mexico
0.687294
-0.02401
1
Fig: co-relation of the currency movement
In the part of Latin America the bolivar do not move in the same direction with the ther currency thus having a negative co-relation with both peso and real. But the other two currency have positive co-relation which signifies that these are moving in the same direction with the movement of dollars. But the movement response is seen more aggressive in the changes of Mexican peso with the other two by having the highest positive co-relation.
Volatility Comparison of AUD vs BDT
Source: oanda

The volatility of a currency is measured by calculating standard deviation of the currency changes among different months. From the calculated standard deviation the AUD having the value of 2.54% and BDT having standard deviation of .96%. By the result we conclude that AUD having more variation than BDT. This signifies that the changes over the AUD direct exchange rate is more frequently move in the last 12 months than BDT. So the AUD is more volatile than BDT.