AUD Australian Dollar: What it is, How it Works, Forex Markets

Assuming no other changes, the Australian dollar will hold its value, and the relative value of the pair increases due to a strengthening of the Australian dollar when compared to the U.S. dollar. A currency pair tells the reader how much of one currency is needed to purchase one unit of another currency. In this case, the Australian Dollar (abbreviated AUD) is considered the base currency, and the U.S. Dollar (abbreviated USD) is considered the quote currency, or the denomination in which the price quote is given. Since the end of China’s large-scale purchases of Australian commodities in 2013, however, the Australian dollar’s value versus the US dollar has since plunged to $0.88 as of end-2013, and to as low as $0.57 in March 2020.

Australian dollar

This piece has been expert reviewed and fact checked by Forbes Advisor Australia Board Member, Tim Waterer, who has more than two decades of experience across FX, stocks, indices, and commodities. To the extent any recommendations or statements of opinion or fact made in a story may constitute financial top-4 best candlestick patterns for 2024 advice, they constitute general information and not personal financial advice in any form. As such, any recommendations or statements do not take into account the financial circumstances, investment objectives, tax implications, or any specific requirements of readers. Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

Unique Factors for the Australian Dollar

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and How to buy celo services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected.

The Australian dollar has been dropping in value due to global economic factors. Without a strong global outlook, the demand for Australian dollars falls, which in turn affects its value. Westpac is, meanwhile, forecasting an AUD/USD exchange rate of .68 by the end of the year, while NAB is again aiming higher with a forecast of $1 AUD to be .69 to the US dollar by December. Early Currency in AustraliaWhen New South Wales was first established in 1788 the English Pound was the official currency, although Spanish Dollars were used quite regularly. In 1813, to try to discourage the illegal use of Spanish Dollars, the centers of the coins were cut out; they became known as ‘holey dollars’ and the cores were called ‘dumps’; this was Australia’s first form of coinage.

The Australian dollar, also known as the ‘buck’, ‘dough’ and ‘aussie’, ranks as the fifth most traded currency in the world. AUD/USD (sometimes written AUDUSD) is the abbreviation for the Australian dollar and U.S. dollar currency pair or cross. The AUD/USD is the fifth most traded currency as of 2022 but the AUD is not one of the six currencies that make up the U.S. a complete guide to the futures market dollar index (USDX). The AUD is managed by the Reserve Bank of Australia (RBA) is the central bank of Australia, which sets the country’s monetary policy and issues and manages the Australian money supply. The bank, entirely owned by the Australian government, was established in 1960. Australia also prints polymer banknotes for a number of other countries through Note Printing Australia, a wholly owned subsidiary of the Reserve Bank of Australia.

1. However, Forbes Advisor Australia cannot guarantee the accuracy, completeness or timeliness of this website.
2. In everyday Australian parlance, these coins collectively are referred to as «gold coins».
3. When the Fed intervenes in open market activities to make the U.S. dollar weaker, for example, the value of the AUD/USD pair could increase.

Will the Australian dollar get stronger against the US dollar?

They add hidden markups to their exchange rates – charging you more without your knowledge. Along those lines, the strength of the Aussie dollar is closely tied to its exposure to Asia and the commodity cycle, as well as a somewhat counter-cyclical position relative to the currencies of other major currencies. The demand in China, India, and to a lesser extent Japan, for natural resources, has pushed the Aussie dollar up in past cycles, only to fall later as commodity demand wanes. Australia is not an especially large country, and as of 2022, it was number 12 in the world in terms of GDP and is about the size of the United States, number 56 in terms of population, and number 20 in terms of the value of its exports. Nevertheless, the Australian dollar is one of the five most frequently traded currencies in the market. Interestingly, the Aussie dollar has only been a free-floating currency since 1983.

The correlation with USD/CAD could also be due to the positive correlation between the Canadian and Australian economies (both resource-dependent). Trading the AUD/USD is also known colloquially as trading the «Aussie.» So in conversation, you might hear a trader say, «We bought the Aussie at 7495 and it rose 105 pips to 7600.» Australia was the first country to produce polymer banknotes,32 more specifically made of polypropylene polymer, which were produced by Note Printing Australia.

A$1.000 AUD = $0.6504 USD

As of 2019, the Australian dollar ranked as the fifth most traded currency in the world, according to worldwide foreign exchange transactions, accounting for approximately 7% of trade. The high trading volume is due in part to Australia’s political and economic stability and to the government’s limited intervention in the foreign exchange market. The Australian economy and the AUD often benefit during periods of rising commodity prices.

Trading the AUD/USD currency pair is also known as trading the «Aussie.» On the other hand, the AUD and NZD tend to be positively correlated. The Royal Australian Mint also has an international reputation for producing quality numismatic coins. Issues expanded into greater numbers in the 1990s and the 21st century, responding to collector demand. Commemorative designs have also been featured on the circulating two dollar, one dollar, and 20 cent coins.

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative. Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination.