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The AUD

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THE Australian Dollar, international code: AUD, is considered one of the most actively transacted currencies in the world. In fact, it ranks fifth in terms of global trading activity after the US Dollar, the European Community’s Euro, the Japanese Yen and the Pound Sterling of the UK.

As the official currency of the Commonwealth of Australia along with Norfolk, Keeling/ Cocos and Christmas Islands, the AUD is also used by neighboring pacific governments such as Nauru, Kiritbati and Tuvalu as their official monetary unit.

When used in international transactions, the AUD is usually denoted by the symbol: AUD$ while within Australia, it is simply represented as A$. The currency is likewise nicknamed as the Aussie among international traders and other market players.

With Australia’s stability as a country, diversified exports, relatively high interest and minimal interference by its government in the foreign exchange market, the AUD has become among the favored currencies among global foreign exchange players.

With the country’s close proximity and strong economic ties with the rest of the booming Asia Pacific economies, the AUD is also seen as a big beneficiary from the rapid growth of regional powerhouses such as China and India as these are among the two biggest export markets for Australia’s mineral and commodity products.

 

 

From Australian Pound To AUD

 

After years of planning and consultations, AUD was officially introduced in February 1996 to replace the Australian pound. What made the AUD distinct from local pound was the adoption of the decimal currency which made transactions much more efficient and standardized compared to the old pound system of shillings and pence.

The new currency was initially pegged to the British pound at two dollars to 1 pound. However, with the loss in value of the pound after one year, the Australian pound moved away from the sterling pound and started to peg its value to the US dollar at US$1 to AUD$ 1.12.

It was in 1983 when the Aussie was first allowed to float realistically show the demand and supply in the global foreign exchange market, balance of payments and other major factors. Since then the value of the AUD has followed closely that of the US dollar.

The AUD hit record lows in April 2001 at US$ .47 cents to one AUD but strongly recovered in recent years. In fact, May 2011 trades revealed that the Aussie surpassed the dollar at AUD$ 1.10 to US$ 1.00. Market watchers and players are even that the exchange rate will even be higher in the coming years.

Many attribute the recent rise of the AUD to Australia’s strong commodity exports to rapidly expanding economies in Asia where Australia very strong trade ties. Furthermore, with the financial woes of the US, investors and institutions have been paying close attention to gold and other precious metals and this activity has benefited Australia greatly being the third largest producer of gold in the world.

 

Australian Dollar Notes and Coins

 

Lately there have been concerns that the AUD maybe overvalued as cited by the Organization for Economic Cooperation and Development (OECD) compared to the US Dollar, a situation that may hurt the competitiveness of Australia’s products in the world market. However, despite these issues, foreign exchange watchers still consider the Aussie as a safe and stable currency as the government has recently increased its spending on infrastructure and other capital expenses to stimulate and revitalize the domestic economy not just depend solely on commodity exports.

Furthermore, the Reserve Bank of Australia is still maintaining its high interest regime, making the AUD still an attractive currency for investors looking for good yields or returns.

The Australian Reserve, Australia’s central bank started issuing bank notes and coins the same year the AUD was introduced. The first AUD bank notes came in denominations of $1, $2, $10 and $20 with the $5 note issued the after a year. Likewise, coins were minted in the amounts of $0.01,$ 0.02, $ 0.05, $ 0.020 and $0.50 of fifty cents.

Later on, $ 2 dollar and one dollar coins were minted as well. Eventually, 1 and 2 cents coins were withdrawn from circulation while one and two dollar notes were issued the replace the $1 and $2 coins.

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