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Forex Glossary

Reserve Bank of Australia

The monetary institution of Australia is the Reserve Bank of Australia or is also referred to as the RBA. In the management of economic affairs of the country, it has the unique role of moderating the Australian dollar to ensure a balance in the economic stability of the country. Similarly to a teacher who must make sure that any sort of misbehavior is punished and students conduct themselves appropriately in a classroom, the RBA employs control and places measures and regulations that will enable the Australian financial system to function as it is supposed to. Its main responsibility is to monitor cash circulation, inflation prices, and interest rates in the country of Australia.

If you live in Australia decisions made by the RBA significantly influence the Australian economy as these determine the interest rate on loans and the exchange rate of the Australian dollar against other currencies in the Foreign Exchange Market.

Main Functions of the Reserve Bank of Australia

  1. Monetary Policy

    The government implements monetary policy to maintain inflation and manage interest rates, among other factors. This approach involves controlling the circulation of money in the economy to regulate inflation, employment levels, and economic development. However, inflation is only the rate of increase in the price of such things as food, clothing, shelter, and other essentials in a given period. When the prices start to increase at such rates it becomes hard for an average citizen to afford basic goods and hence the RBA tries to avoid such.

  2. Issuing Currency

    The RBA is ultimately accountable for the money supply circumstances of the Australian nation. It is responsible for the design, printing, and issuing of all Australian banknotes. You might also have realized that the Australian currency includes banknotes which are colored and contain features like windows and holograms. All these features also help to eliminate forgery, thus making the money more secure.

  3. Financial Stability

    Another function of the Reserve Bank of Australia is to maintain the stability of the financial system in Australia. This implies that the financial industry, especially the banking sector should be very safe from absorbing too much risk. Thus, the main tasks of the RBA include maintaining with crises, for example, the acute failure of a bank, a blow to the economy, and the population’s savings.

  4. Payments System

    When you are paying money, people use cash, a debit card, or carry out bank transfers such that every time this happens the RBA is a participant in ensuring the money gets to the proper place. You can view the payment system as a large network where money circulates within the domestic territory. The RBA makes sure that it is safe and effective for all people to use this system.

The Reserve Bank of Australia and Forex Markets

  1. Currency Management: Foreign exchange or forex is where numerous currencies including Australian dollars (AUD) are traded and thus its value changes frequently. The RBA doesn’t set the value of the AUD, but it helps keep it stable. If the AUD gets too strong or weak, it can make exports more expensive, which can hurt businesses and jobs in Australia.
  2. Forex Reserves: The forex reserves are large holdings of foreign currency that are possessed by the RBA. These reserves help during financial problems and keep the Australian dollar (AUD) stable. If the AUD loses value quickly, the RBA can buy more AUD to help it recover.

The Reserve Bank of Australia’s Impact on the Global Market

The RBA helps control Australia’s economy and also plays a role in forex trading. When it raises interest rates, more foreign investors want to buy Australian money (AUD), increasing its demand.

Other organizations that the RBA associates with include – The International Monetary Fund (IMF) and the Bank for International Settlements (BIS). The Reserve Bank of Australia keeps Australia connected to the world and makes sure its banks meet global standards.

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