But at the same time, the reduction in offshore borrowing by the banking system has been putting downward pressure on it. The net effect of all these flows however, is that the Australian dollar is higher than one would expect, given fundamentals such as the terms of trade and interest differentials.
Experience elsewhere around the world, including here in Australia, suggests that extensive  BIS central bankers’ speeches  1  exchange controls and a highly managed exchange rate are unlikely to be consistent with an internationalised currency. The Chinese authorities understand this and have signalled their intention to further liberalise the capital account and move to a more flexible exchange rate.