The Australian dollar (AUD) is the currency of Australia. AUD is also the currency of the independent
island states of Nauru, Kiribati, and Tuvalu. The Australian dollar is abbreviated as ($), A$ or AU$. Australia was the first
nation in the world to transform its currency system into one totally based on polymer banknotes.
The Australian dollar is the sixth most heavily traded currency after the US dollar, Euro, Japanese yen, British pound and
Swiss franc. It makes up around 5% of world foreign exchange transactions, i.e. approximately 1.9 trillion Australian dollars
a day.
Evolution of the Australian Dollar
The Australia dollar was pegged to the US dollar between 1946 and 1971 under the Bretton Woods System and was effectively
pegged to the sterling until 1967. After the breakdown of the Bretton Woods System in 1971, Australia converted the fixed peg
to a moving peg against the US dollar. On December 9, 1983, the Australian dollar was "floated," thereby reflecting credits
and debits in the balance of payments with movements in the value of the Australian dollar.
Australia is the second largest producer of gold in the world. Hence, its currency is also greatly impacted by the value of
gold.
Popularity of the Australian Dollar
Currency traders deal in Australian dollars on a large scale due to the following reasons:
- Australian dollar interest rates have traditionally been relatively high.
- The Australian government’s intervention is minimal in the foreign exchange market.
- AUD can be freely imported and exported. However, if the amount imported or exported
crosses 10,000 Australian dollars, a declaration needs to be submitted.
- Relative stability of the Australian political system and economy.
- The currency traders include the Australian dollar in their portfolio of world’s major currencies, as it offers
diversification benefits. This is due to the fact that the Australian dollar has high exposure to major Asian economies and
their commodities cycle.
Australian Dollar Exchange Rate
After the Australian dollar was floated, it reached its highest value against the US dollar in the first 20 years.
This figure stood at 96.68 US cents on March 18, 1984. The Australian dollar reached its lowest value of 47.75 US cents
in April 2001. It appreciated to a new high of 98.49 US cents on July 15, 2008. In March 2009, 1 AUD was equal to US$0.6785,
GBP0.4724 and GBP0.5008.