RBA buying and selling CGS? (1 Viewer)

[nevmirza]

hey,

i always get confused with this...

when the RBA buys Aus dollars and sells foriegn currency does this create a shortage of funds and upward pressure on the cash rate???

vice versa if the RBA sells AUS dollars what happens??

thanks

 

[IceOnFire]

hey,

i always get confused with this...

when the RBA buys Aus dollars and sells foriegn currency does this create a shortage of funds and upward pressure on the cash rate???

vice versa if the RBA sells AUS dollars what happens??

thanks

Australian dollars?!?? What you are talking about affects our level of exchange rate.

The RBA buys and sells Second hand commonwealth government securities within the short term money market. When they buy these securities, it increases the level of funds within the banks' exchange settlement accounts, hence creating a surplus of cash and therefore decreases the cash rate. It depends on the level of foreign reserves the government has got though. Vice versa when the government sells.

All you have to think is where the securities and cash are going to, and from there you can think logically.

 

[Jerruy]

hey,

i always get confused with this...

when the RBA buys Aus dollars and sells foriegn currency does this create a shortage of funds and upward pressure on the cash rate???

vice versa if the RBA sells AUS dollars what happens??

thanks

The RBA Sells CGS to the STMM which creates a shortage of funds which increases the cash rate and interest rates. These higher interest rates see increase in D for the AUD as Foreign investors attempt to take advantage of the higher interest rates (this is happening now...the AUD is up to 92 cents as an interest rate rise is likely on Tuesday and foreign investors want to take advantage of this--look for the AUD to hit 1 USD).

The RBA rarely changes interest rates to influence the AUD...a couple of years ago one reason for rthe I/R rise was the low AUD, but it is rarely done.

The RBA can influence the $ by dirtying the float. If the RBA wants to increase the value of the AUD, it will use its Foreign Currency Reserves to purchase Australian Dollars on the FOREX market. This increase in D sees an appreciation!

 

[nevmirza]

sweet... thanks

 

[ilovecommunism]

回复: Re: RBA buying and selling CGS?

btw...

before the RBA adjusts the cash rate, it has to organize a meeting between private banks and itself, in order to discuss about the adjustment it's gonna make... because it still has to consider the loss and gain of those banks...