What is the Australian Dollar?

Published by Thomas Herold in Economics, Investments, Trading

'Australian Dollar' is explained in detail and with examples in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

The Australian Dollar is the official national currency for the country of Australia. It is also considered to be one of the eight main trading and exchange currencies of the world, alongside the U.S. dollar, Eurozone euro, British pound sterling, Japanese Yen, Swiss franc, New Zealand Dollar, and Canadian Dollar. The most popular currency pair for the Australian dollars is the AUD/GBP Australian dollars to Great British pounds.

AUD is the official currency code for Australian dollars in the world of foreign exchange and Forex markets. The symbol of the Australian Dollar is $. Where currency cross pair and exchange rates are concerned, the most popular AUD pairs are as follows: AUD/GBP, AUD/EUR, AUD/USD, AUD/INR(Indian Rupee), AUD/NZD (New Zealand Dollar), AUD/THB (Thailand Baht), AUD/MYR (Malaysian Riggit), AUD/SGD (Singapore Dollar), and AUD/JPY (Japanese Yen).

The Australian Dollar is overseen and regulated tightly by the national central bank of Australia, called the Reserve Bank of Australia. It is the fifth most heavily traded currency on earth. Its nicknames are the buck, the Aussie, and dough. Because of the significant raw materials which the nation of Australia mines and exports, the Australian Dollars are called a leading commodity currency. This is why the AUD value is constantly impacted by the Asian import markets of such heavyweights as especially China.

The Australian currency consistently enjoys higher interest rates than the majority of its G8 currency peers. Thanks to this fact which is not lost on the world of global Forex traders, it is a favorite destination pair for carry trades, particularly with the Japanese yen as the one they borrow against. Carry trades prove to be strategies in Forex where traders sell a lower interest rate currency at the same time as they buy one of the higher interest rate currencies. They literally fund the purchase of the higher interest rate paying one with the proceeds from the sale of the lower interest rate paying currency. They then collect the spread difference between the two interest rates.

The history of the Australian dollar is an interesting one. The original colony of the “land down under” New South Wales became established in 1788. At that time, the GBP Great British pound sterling was the formal currency of all dominions of the British Empire, even though Spanish silver dollars were also regularly utilized by the South Seas colony. The British authorities tackled this issue in 1813 in an effort to dissuade the locals from illegally utilizing the Spanish dollars. They cut the coins’ centers out and these new defaced “holey dollars” and cores of the coins the “dumps” became the first type of coinage in Australia.

By 1825, the British government in Australia had imposed the Sterling standard. From this point on, British coinage started to be struck locally in Australia. The coins were bronze and silver pieces that were utilized all the way through 1910. At this point, a brand new national currency arose, the Australian pound. Because the Aussie pound was pegged in value against British Pound Sterling, it had a tangible gold standard backing it. Only three years later, the original Australian bank notes series became issued.

Australia abandoned the British pound linked currency in February of 1966. It was this year when the AUD Australian Dollar became formally introduced utilizing a decimal system of coinage. British types of pounds, shillings, and pence were eliminated in favor of simpler to utilize and understand dollars and cents.

The Australian banknotes were phased out in favor of a new technology called polymer in 1988. The Australians themselves developed this polymer technology in order to help fight counterfeiting of Australian bank notes.

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The term 'Australian Dollar' is included in the Investments edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.