What Is the AUD (Australian Dollar)?
The Australian dollar (AUD), the official currency of the Commonwealth of Australia, is abbreviated as AUD (Australian Dollar, or “Aussie”).
The Australian dollar is divided into 100 cents and is denoted by the letters $, A$, or AU$. In 1966, the Australian dollar (AUD) replaced the Australian pound, which had been in use since the country’s days as a British colony.
- Nauru, Tuvalu, and Kiribati are Pacific Island countries that use the Australian dollar as their currency.
- The Australian Dollar, or AUD, is Australia’s official currency, as well as the currency of numerous Pacific island states.
- The Australian Dollar (AUD) was launched in 1966 to replace the Australian Pound, which was tied to the US dollar at the time.
- In 1983, it became a free float, and it has remained that way ever since.
- The Australian dollar (AUD) is a popular currency in forex trading pairings, consistently ranking among the top five most traded currencies.
What is au: Understanding the AUD (Australian Dollar)
The Australian dollar debuted on February 14, 1966, as a replacement for the Australian pound. It was tied to the British pound sterling at 2 dollars to 1 pound at the time.
Australia abandoned the sterling peg in 1967 and replaced it with a peg to the US currency of 0.8929 Australian dollars to one US dollar.
It was converted to a movable peg to a trade-weighted index in 1976. In 1983, the Australian dollar became a free-floating currency.
The Reserve Bank of Australia (RBA) is Australia’s central bank, which determines the country’s monetary policy and issues and administers the country’s money supply. The bank was founded in 1960 and is wholly owned by the Australian government.
Because Australia is a major supplier of coal and iron ore, the value of its currency is highly influenced by commodities prices.
Oil prices fell to decade lows during the commodity collapse of 2015, while both iron ore and coal prices fell to new lows.
As a result, the Australian dollar fell substantially against the US dollar, plummeting more than 15% to parity with the New Zealand dollar (NZD) – values not seen since the 1970s.
AUD and Forex Markets
The attractiveness of the Australian dollar among forex traders stems from its three Gs: geology, geography, and government policy.
In terms of natural resources, Australia is among the world’s richest countries, with metals, coal, diamonds, beef, and wool among them. Australia is a regional power as well.
Because the dollar is the quote currency in these circumstances, the AUD/USD currency pair tends to be inversely associated with USD/CAD and USD/JPY.
Because both AUD and CAD are commodities block currencies, the AUD/USD pair frequently runs counter to USD/CAD. Trading the AUD/USD currency pair is also referred to as “Aussie” trading. The AUD and NZD, on the other hand, have a strong positive correlation.
According to global foreign exchange transactions, the Australian dollar was the fifth most traded currency in the world in 2019, accounting for almost 7% of all trade.
Australia’s political and economic stability, as well as the government’s limited participation in the foreign exchange market, contribute to the high trading volume.