Abstract
This paper investigates the contribution of Australian coal export to determine the exchange rate of Australian dollar with the US dollar. The quarterly data of Australian coal export and the Australian dollar exchange rate from 1992-2009 are employed to measure the influence of Australian coal export on A$/US$ exchange rate. This study finds that the Australian coal export has a positive relationship with the exchange rate of A$/US$ and their relationship is becoming stronger. The findings of this research suggest that the volume of Australian coal export contributes about 8% to determine the exchange rate of A$/US$ between the period of 1992-2009. The results of this analysis confirm that for each one million tonnes export increase of Australian coal, the Australian dollar value against the US$ increases by 0.002450 USD.
Highlights
C oal is the single largest foreign currency earner for Australia
This paper examined the effects of the volume of Australian coal export on Australian dollar exchange rate against the US$
This study is able to confirm that the volume of Australian coal export has a positive relationships with the exchange rate of A$/US$
Summary
2010, Australia has earned A$160 billion by exporting its mineral resources. The relative sectoral contribution towards this export earnings is: coal A$55 billion (around 34.37%), followed by ores A$52 billion (around 33%), other mineral fuels A$21 billion (around 13%), gold A$17 billion (around 11%), and other metals A$14 billion (around 9%) (ABARES, 2010). The volume and value of Australian coal export has increased significantly between the year 2007-08 to 2008-09 because of the prices have more than doubled during this period. The impact of this large volume of export had raised the Australian dollar’s value to a new high.
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