International Trade (Unit 3 Topic 1)  

Why the Australian dollar moves — and how to use this tool

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Every time you buy something from an overseas website, you're in the foreign exchange market. The price you pay depends on the exchange rate, and that rate moves constantly because the dollar itself is bought and sold like any other good — its price set by demand and supply.

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This simulator isolates four forces that shift that demand and supply. Start with Try a scenario. Load GFC shock, then Mining boom, and watch the projected path flip direction. The Strongest driver box names which of the four is doing the most work, and the analysis underneath explains why in words.

 

Then experiment. Drag one slider at a time and hold the others steady — that way you can see what each channel does on its own. Push interest rates in one direction and risk sentiment in the other, and notice the dollar can barely move even when a great deal is happening underneath.

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Two cautions. The starting values are round numbers for comparison, not live market data. And this is a simplified model: in reality the channels interact, and what markets expect to happen often matters more than what has already happened.