AUD - Australian Dollar

The importance of Australian Dollar

The Australian Dollar is the fifth most widely used currency in the world, accounting for 6.9% of the total market value as of April 2016. 

In the foreign exchange market, the AUD ranks just behind the US Dollar, Japanese Yen, Euro, and British Pound. 

Australia’s economic stability and favorable monetary policies from the government enable the Australian Dollar to be highly appreciated and much trusted by investors. The currency’s strong liquidity in the market is another factor keeping the currency’s value at such high position with confidence among investors.

Thanks to the prudent monetary policies from the Reserve Bank of Australia, inflation levels are maintained, ensuring that the AUD remains a viable option for both domestic and international investors. As a result, the Australian Dollar continues to hold its position as a reliable and trusted currency on the global stage.

History of Australian Dollar

Before the Australian Dollar, the Australian pound had been in circulation since 1910 and officially separated from the British pound in 1931. From 1910 to February 14, 1966, the whole country used the pound, shilling, and pence as similar to the British system. 

In 1963, a public consultation process was initiated to find out the name for a new currency, resulting in a shortlist of seven names. Eventually, Treasurer Harold Hold announced that the new currency would be called royal, with other suggestions including austral, oz, boomer, and emu. However, due to strong public disapproval, the name “dollar” was chosen instead and has been used ever since.

With the adoption of a new currency, a decimalization system was introduced to simplify the currency structure, modernizing Australia's monetary system and aligning it with international standards. In 1967, Australia left the British pound system and adopted the US dollar. 

On September 20, 2012, the Reserve Bank of Australia announced upgrades to the current currency. The newly issued banknotes were enhanced for better security features, with the first of the new notes—the 5-dollar bill—being released on September 1, 2016.

Australian Dollar denominations

Australian Dollar (AUD) comes in two different types of Coins and Banknotes.

Australian Dollar coins

In 1966, coins were issued in the following denominations: 1 cent, 2 cents, 5 cents, 10 cents, 20 cents, and 50 cents. 

In 1984, the one-dollar coin was introduced, and then the two-dollar coin in 1988. These two coins were discontinued in 1991.

In 2006, a commemorative version of the one-cent and two-cent coins were issued to commemorate the 40th anniversary of decimal currency.

In 2013, Australia introduced its first triangular coin to mark the 25th anniversary of the inauguration of Parliament House. The five-cent coin is still in circulation, and transactions are often rounded to the nearest 5 cents.

Australian Dollar banknotes

The Reserve Bank of Australia introduced the banknotes of the Australian Dollar on February 14, 1966. The initial series included denominations of A$1, A$2, A$10, and A$20. In 1967, 1973, and 1984, the A$5, A$50, and A$100 notes were issued, respectively. Also in 1984, the A$1 coin and A$2 coin replaced the equivalent banknotes, with all previous notes remain legal tender.

Australia is the first country to use to polymer banknotes. There are two series as follows:

• First polymer Series: The polymer banknote was introduced in 1988 by the Reserve Bank of Australia. The first polymer series were cleaner than paper notes, are more durable and easily recyclable.

• New polymer Series: The new version of the polymer banknotes was first issued on September 1, 2016, starting with the A$5 note. In September 2017, the A$10 note followed.

Factors Influencing the currency value of Australian Dollar

Australia is a developed economy, ranking 13th-largest national economy by nominal GDP. As Australia itself is a large goods exporter with strong ties with international financial markets, the Australian Dollar (AUD) maintains its influence in the global currency market, ranking among the top six most traded currencies.

The value of the Australian Dollar (AUD) is currently determined by various economic, political, and international financial factors, specifically:

• Global economic conditions: The economies of major trading partners such as Japan, the U.S., and China have a strong impact, helping to increase the value of the AUD through robust export growth. Recently, Australian trade has been shifted away from the European and North American market to East Asian ones.

• Commodity prices: Australia’s economy largely depends on the export of coal, iron ore, gold, and agricultural products. Therefore, the value of the AUD is influenced by price fluctuations of these commodities. When commodity prices rise, the value of the AUD increases, and vice versa.

• Political situations: Global political events such as trade wars and major elections affect the value of the AUD.

• Monetary policy of the Reserve Bank of Australia: The bank's decisions on interest rates greatly impact the value of the AUD. When interest rates rise, the AUD tends to increase due to higher investment inflows into Australia. Conversely, if interest rates are lowered, the AUD loses value.

The value of the Australian Dollar depends on various domestic and international economic and political factors, particularly the export commodity market, which is key in forecasting the AUD's trends.