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Immigration See other Immigration Articles Title: Rising dollar dents RBA result [Oz Central Bank] The strengthening Australian dollar has dented the balance sheet of the Reserve Bank, with more paper losses likely as the country's relatively high interest rates increase the chances of the currency gaining further. The RBA today reported net unrealised valuation losses of $2.475 billion, generating a total accounting loss of $1.393 billion, the central bank's first loss in 13 years. "This is not the first such loss - the Reserve Bank last experienced one on an AIFRS basis in 1993/94 - and it is unlikely to be the last," RBA governor Glenn Stevens said. "The reason is that there is very little scope for a central bank to manage foreign currency risk without compromising its policy obligations. "Foreign assets cannot be hedged back to Australian dollars because that would defeat the purpose of holding them. "This risk has to be accepted as part and parcel of being a central bank." The Australian dollar gained almost 15 per cent against the US dollar in the last financial year, the second best performance of the world's major currencies. The Bank said it posted underlying earnings of $1.381 billion for the 2006/07 financial year. The result was an improvement on the previous financial year when the RBA recorded earnings of $1.156 billion. The increase in earnings reflected a global rise in interest rates, which continued the trend of recent years, following a period in which rates had declined to unusually low levels, the RBA said in its annual report. The RBA said valuation losses had been a particularly important influence on its earnings in the past financial year. "This was because the exchange rate appreciated by 12 per cent in weighted-average terms against the currencies in which Australia's international reserves are invested," the RBA said. "Bond yields also rose around the world," the RBA said. The RBA paid a dividend of $1.085 billion to the Federal Government. "When the Australian dollar exchange rate appreciates, the accounts record a fall in the value of foreign assets. "In 2006/07, the rising Australian dollar meant that the bank experienced a substantial unrealised valuation loss on its financial assets, which exceeded the flow of income from its assets during the year." As is the norm in Australia, the RBA reports its profit and loss position under the Australian equivalents to (the) International Financial Reporting Standards (AIFRS) system. Mr Stevens said the RBA's balance sheet expanded in 2006/07 to around $132 billion - a rise of 25 per cent from the previous year and an increase of 120 per cent over the past five years. "This was in large part a result of the accumulation of government deposits resulting from budget surpluses and the accompanying need for the bank to hold counterpart assets with an appropriate risk profile," he said. "It had no impact on monetary policy or financial conditions. "Now that the Future Fund is in operation, the balance sheet is likely to diminish in size over the next year or two."
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#1. To: DeaconBenjamin (#0)
Deacon, please do not beat around the bush (just got to love THAT pun!)! Ya got to come right out and tell them that the Aus. bank lost money cause they were holding dollars! And that loss is just a small hint about what is going to happen to anyone/any bank/any nation that continues to hold dollars. And, rest assured, Iran and Ven. know this!
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