Despite floating the dollar, the Reserve Bank of Australia maintains the ability to either directly or indirectly intervene with FOREX exchange rates.
Watch the video below to learn about the influence of the Reserve Bank on Exchange Rates in HSC Economics:
When the RBA intervenes they also have the option of sterilising their transaction i.e. ensuring that when they purchase or sell AUD, they offset any changes to the supply of AUD in the domestic money market. Failing to sterilise their intervention could affect the cash rate.
Watch the video below to learn about how the RBA sterilises transactions in HSC Economics:
