Aussie Dollar Facts You Need To Know About

Aussie Dollar Facts You Need To Know About

Most of us find the topic of currencies an absolute bore. To be honest it is but there are a few simple facts that you need to know about the Aussies dollar such as what makes it go up or down in value. It’s pretty simple and as Aussies abroad it’s important that we know a few Aussie dollar facts so our hard earn cash doesn’t go down the gurgler.

Aussie Dollar Facts You Need To Know About

So let’s take a brief look at the basic facts about the Aussie dollar and in true Ozzies Abroad style we make it simple and interesting.

Facts about the Aussie Dollar

– The Australian dollar sign is $ and It’s code is AUD. It is sometimes seen as $A or AU$.

– The AUD is used in Australia, as well as Christmas Island, Coco Islands, Norfolk Island, Kiribati, Papua New Guinea, Tonga, Tuvalu and Vanuatu. Bet ya didn’t know that!

– The AUD is the 5th most traded currency in the world and is referred to by currency traders as the “Aussie Dollar” or “The Aussie”.

– The Aussie rises and falls against other currencies every day. The value of the Aussie against other currencies can be referred to as the exchange rate.

Exchange rate is the value of two currencies compared to each other.

For example:

If the AUD/USD is around 0.80, this means that A$1 is worth US$0.80 or US 80 cents. If, you were to sell a $1AUD you would get US 80 cents. Alternatively, if you wanted to buy USD with AUD, you will need A$1.20 to get US$1.00.

Aussie Dollar Facts You Need To Know About

So who cares about the Aussie dollar

We need to know about this when we travel overseas and wish to buy foreign currencies with our Aussie dollars. Also, when we send our hard-earned GDP back to Australia for savings or to buy a house, the exchange rate can wipe out a lot of our hard-earned cash if we don’t get it right.

Also, companies that do international trade like buying parts and supplies from other countries. `They need to be aware of exchange rates so they don’t get stung and lose their profits to bad exchange rates.

What influences the Aussie Dollar?

To put it simply….supply and demand. Like anything, the value goes up if the demand goes up. If more people are buying the Aussie dollar the demand might outstrip supply but if people are selling and nobody wants the AUD it will lose value and become cheaper to buy.

What Influeces Supply and Demand of the AUD?

Imports and exports: The amount of money Australia spends on imports relative to the amount we earn on imports. Look at it this way, if the world wants to buy our stuff ( Mostly commodities ) then they need to get their hands on the AUD to buy it. So the demand goes up for the AUD and it’s value increases.

If we are buying a lot of crap from other countries then we need their currency to buy it. So we sell AUD to get their currency to pay for their crap. Selling the AUD increases supply and this increased supply devalues the AUD. So that’s why it’s important to buy Australian Made products.

Global Financial Situation

The good old US dollar, A.K.A “The Greenback” is the world’s reserve currency which means the USD is commonly used in international transactions, international investments and all aspects of the global economy. Therefore, government backed US bonds are seen as a “safe haven” for investors during times of global financial instability and uncertainty. When investors put their money in US bonds they need to buy the greenback to do so thus increasing demand. The demand increases the value of the greenback and puts downward pressure on other currencies including the Aussie.

Interest Rates

Australia has some of the highest interest rates in the developed world for now. This has helped keep the Aussie dollar high because investors benefit from this. However, if the US raises their interest rates it will become a more attractive place and this will lure money away from other countries including Australia.

Commodity Prices

Australia relies a lot on selling iron ore and coal to other countries, especially in Asia. If the demand for these commodities goes down and so does the demand for our currency.

Aussie Dollar Facts You Need To Know About

Currency rates are difficult to predict and experts have varying opinions on to which way the value of the Aussie will swing. This article points out the basic principles but there are more factors and considerations.

Aussie Dollar Facts You Need To Know About

The most important thing is to not get stitched up with unnecessary charges when sending your hard-earned money back home. The banks are notoriously expensive but surprisingly people still send money overseas through the banks. There are also shop front exchange houses and transfer companies. Each has there pros and cons and Ozzies Abroad looks into How To Transfer Money To & From Australia Here.

There You Have It

So start saving some money and send it back to Australia. We do hope this article has helped you. If, you have any questions or would just like to get vocal than do it in the comments section below.

See Ya!

 

 

 

4 Replies to “Aussie Dollar Facts You Need To Know About”

  1. Such an interesting article! One of my favorite classes in college was economics, and this article very much lines up with what I learned.

    A few years back I was interested in the Forex market, but it had not occurred to me until recently to seek out what the AUD was and how to worked in terms of exchange, etc.

    Thank you for this resource!

  2. Hi! Interesting and informative article.
    I agree with you that currencies are extremely important when it comes to import and export. For companies that trade internationally, little change in currency value makes a huge difference in profit.
    Currencies also affect real estate. Foreign investors are more willing to buy houses if our currency value decreases (they can buy more for less of their currency).
    I notice that CAD (Canadian dollar) and AUD share many similar ups and downs. Both currency decrease value (compared to USD) in 2015. Why do you think that is?

    Great article! Thanks!

    1. I think that we export raw materials, have a similar population and land size. We are both part of commonwealth, developed and just plain awesome. Ha Ha don’t know really!

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