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Chris,
Some points that I think need to be made,

None of those counrtys mentioned qualify as par Barcoo's post,
I am thinking about a country which exports four times as much as it imports. Most of what it needs is produced at home in local dollars

Yes all those countrys have probs but not really the point I used the word relative & thats important.It matters not whether all your competitors are sick if they are miles in front, so far in front that even if they need hospitlisation you still aint goin catch them in the race. The only thing that really matters is that in relative price terms your up with the pack the closer to the front the better.


Except for trade between European nations, almost all world trade is conducted in $US. When Australia sells beef to Korea or iron ore to Japan, the deals are done in $US
Yes those deal are negotiated over months & for extened time frames at set rates.

A low local currency allows you to sell at alower price in $US, but still a higher price in the local currency.
Yes good, but lets follow that a bit further because it matters little what the exchange medium currency is at some point you have to convert that income into your local currency. So that income will depreciate in value as your local currency reduces in value over time.

Since the business pays its costs in Australian dollars, those costs are reduced
That I think long term is not right because of two factors,

1)A low dollar would increase exports because of the low returns for producers of selling products in the Aust market. Higher exports leaves less product for local markets less product means less competition, means higher prices.Higher prices leads to pressure on wages , leads to pressure on unemployment levels, leads to less dispossable income.

2)The income is not all disbursed in one day, a % will be profit. That profit will depreciate in value along with the dollar, meaning when it is used whatever it is used for will likley cost more than when first that income was made(less buying power).Because of the twofold effect of reduced relative value * & higher domestic prices. Higher prices are caused because all imported product/produce would cost more & local produce/products are less abundant because higher returns can be got exporting.


If the local currency got too strong, it would turn off the international competitiveness that started the process.
Yes, I did say relative & I think that is really what I mean not excessivley high, your aim should always be for a high relative currancy is the basic thing I'm saying.

I seem to be clearly out voted in my thoughts on this so I restrick any further musings on the subject, which I can imagine is starting to bore most to sleep.

JR


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