Currency Exchange Rates

Australia Currency

Australia Currency - Factors Affecting Australia Currency Exchange

Australia Currency

The Australia currency is one of the worlds most actively traded currencies exceeded only by the US dollar, Pound Sterling, Euro and Japanese yen. In terms of market trading hours, and due to time differences, the Sydney time zone is considered the starting peg for the 24 international currency markets. The Australian currency is a popular currency due to the relatively stable business, economic and social conditions affecting the country. It is also reasonably free from aggressive intervention by the central bank (Reserve bank of Australia).

Australia is considered a leading commodity producing country affected by demand from its main exported produce which includes agricultural, mineral and energy commodities. It's leading export partners are Japan, China, US and Korea. Recent activity with China has contributed to the buoyancy in the Australian economy and a healthy demand for Australian produce and the Australian currency exchange. In fact, the Australian dollar has continued to rise against international currencies, reflecting favorable terms of trade and in response to the demand for aussie dollars. Australia currency has historically experienced an increase in demand in conjunction with the commodity cycle.

Australia Currency

The Australia currency is affected by economic and business conditions that influence the demand for its currency and perception about business conditions. Due to the relative high interest rates, Australia has been viewed favorably as a place to invest due to the ability of foreigners to borrow at lower rates and invest to capture the interest rate differential. Hence, movements in domestic and international interest rates also affect the currency of Australia. Domestic growth and inflationary pressures also contribute to this as the natural response of the Reserve Bank of Australia is to raise rates to combat inflationary concerns. This makes the Australian currency even more attractive to international investors and contributes to upward pressure on the exchange rate.

Historically, the Australia Currency was first pegged to the value of the British Pound and then to the value of the US dollar. With the breakdown of the Bretton Woods system in 1971, the Australian currency was changed to a moving peg against the US dollar. In 1974, this was moved to a trade weighted index comprising a basket of currencies. It was later adjusted to a moving peg. Under the labor government in 1973, the Australia Currency was freely floated and its value is now reflected by the market forces of supply and demand and the economic fundamentals affecting Australia.

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