Exchange Rate Analysis

Topics: United States dollar, Exchange rate, Currency Pages: 9 (2655 words) Published: September 8, 2011
Table of Contents
Table of Contents2
1.0 Background Information4
1.1 Limitations of Analysis4
2.0 Data analysis4
2.1 Foreign exchange rate between AUD and USD (AUD/USD)5
2.2 Foreign exchange rate between RMB and USD (RMB/USD)7
2.3 Comparison of exchange rates of AUD/USD and RMB/USD8
3.0 Relationship between AUD/USD and RMB/USD10
4.0 Hypothesis testing11
5.0 Factors Analysis13
5.1 Inflation rate13
5.2 Interest rate13
6.0 The effects of exchange rate movements13
6.1 American dollar depreciation14
6.2 Australian dollar and Chinese Yuan appreciation14
7.0 Conclusion15


Statistics has proved to be an essential tool towards gaining a better understanding of many business needs and global economic by collecting, analyzing, interpreting, and presenting of the data.

This paper by using statistic method discussed the main movements of the exchange rate between Australian Dollar against American Dollar (AUD/USD) and Chinese Yuan against American Dollar (RMB/USD) in the past 120 days.

The exchange rates data has been collected and analysed, presented by graphs to show the general trend of exchange rate between AUD/USD and RMB/USD for the past 120 days. The six research questions has been formulated and concluded. We use the statistical techniques such as the regression equation to work out the relationship between AUD/USD and RMB/USD. As well as using the hypothesis testing to find out any significant differences in the variability of the depreciation of USD for the two other currencies.

We were underlying conditions and factors that caused these specific movements to happen. And also economic models with the sample population selected will be used to support the discussion and to analyses the reason for these fluctuations such as the inflation rate and interest rate.

1.0 Background Information
Due to the global financial crisis in 2008, many countries have been affected by this disaster, especially America. America has been a central economy and exchange rate against the world, the downward of the economy lead to a rapidly decline in the US dollars, then the foreign exchange rate plays a significant role all over the world, people in every county has been more concerned about the fluctuation of the currencies. To compare the variable currencies in the exchange rate, all the data and statistics revealed the US dollar being decline in the exchange rate against the RMB and Australian dollar, and we have formulate a sample data method and six research population methods to analysis on the reasons base on some public documentations and assumptions. 1.1 Limitations of Analysis

Due to the limited time, cost spending thus the quality of research and analysis will be limited. In addition, data is collected from publicity source as Internet, thus the immediate and accurate important may not reached and consequence the report will be attained with not deep analyzing with real situation. Finally, because of specific characteristics of exchange rates, we might not have enough of specialize to cover the inside with many factors could impact on the exchange rates.

2.0 Data analysis
The exchange rate fluctuated every day because of the macro economy in the country and each country will have different macro economy in terms of the number of the factors, e.g. the difference in the inflation rate, interest rate, etc., therefore for the purpose of this report, all of the data and analysis will be using Australia, China and US since all of the country are using freely flexible (freely floating) exchange rate systems. The following data based on the American currency which means AUD or RMB against USD. 2.1 Foreign exchange rate between AUD and USD (AUD/USD)

(Figure 1: AUD against USD in past 120 days)

As seen above in Figure 1, the main direction of the AUD/USD exchange rate over the past 120 days has been...
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