November 29, 2022

What makes the Australian dollar popular in the Forex market

LQD Forex - What makes the Australian dollar popular in the Forex market?

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The Australian dollar is the currency of Australia and its external territories. Aussie is one of the five most frequently-traded currencies in the Forex market.

Australian dollar’s sign is $, its code is AUD and its nickname in the Forex market is Aussie. Sometimes they use A$ or AU$ to distinguish it from other dollar-denominated currencies. It is subdivided into 100 cents.

The Reserve bank of Australia is the central bank that controls the regulation of the Australian currency. RBA’ s duty is to contribute to the stability of the currency, full employment, and the economic prosperity of the Australian people too. Finally, among other, Australia’s central bank manages the country’s gold and foreign exchange reserves.

What makes the Australian dollar popular in the Forex market

The Aussie is popular among Forex traders, accounting for over the 6% of the world’s daily share behind the US dollar, the Euro, the Japanese Yen and the UK pound sterling.

Australia is popular among currency traders due to the comparatively high interest rates in Australia. Also, there is relative freedom of the foreign exchange market from government intervention. The general stability of the economy and the political system fulfill trader’s criteria.

The country has a wealth of natural resources that are in high demand, including oil and gold. Among the developed countries, Australia strands out for its heavy reliance upon commodities. 

Also, geography has positioned the company as a choice trading partner for many fast-growing Asian economies. The Australian dollar has wide exposure to Asian economies and the commodities cycle.

Government policy has led to fairly stable high interest rates and a stable government and economy. Further, lack of intervention in the currency markets favors the economic situation. Australia frequently has some of the highest interest rates in the developed world.

Major Economic Data related to the Aussie

Major economic data includes the release of GDP, retail sales, industrial production, inflation, and trade balances. Further, investors should take note of information on employment, interest rates (including scheduled meetings of RBA).

With Australia, though, there are other factors that also need watching. Commodities drive Australia’s economy. Australia’s Bureau of Agricultural and Resource Economics and Sciences (ABARES) produces regular reports.

Finally, when high resource prices lead traders to concerns for the health and growth sustainability of economies all over the world, the Australian economy usually looks healthier.

So, that makes the Australian currency a popular alternative for traders looking to go long on commodity exposure.