Australian Dollar – Currency Overview

• ISO Code: AUD
• Symbol: $ or AUD
• Subunit: 1/100 Cent
• Inflation: 4.2%
• Nickname: Buck, Aussie

Historical Overview

The British founded the first Australian settlement of Port Jackson in 1788, and the country remained under British rule until it was granted full sovereignty in 1931.

In the eighteenth century, Australians utilized imported Spanish, Portuguese, Dutch and British coins, until the arrival of officially imported pennies from Britain in 1800.

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In the eighteenth century, Australia adopted the British Pound Sterling, and local banks and provinces began to issue Pound bank notes. The shortage of coins, however, continued and in 1813 led the government to modify Spanish silver dollars by cutting a round hole in their center, counter-stamping them, and pricing the cutout piece at 15 pence and the “holey dollar” at 5 shillings. These holey dollars were legal tender until larger shipments of coins from Britain began in 1829. In 1851, gold was discovered in Australia which led to the setup of a Sydney mint in 1855 that converted the gold into sovereigns until 1931.

The Australian Pound (AUP) was made the official currency in 1909, and priced at par with the British Pound Sterling. In early 1966, Australia replaced the Australian Pound with the Australian Dollar (AUD) at the rate of 2 Australian Dollars per 1 Australia Pound.

There are several other territories and countries currently using the Australian Dollar as official currency. These include the Norfolk Islands, Christmas Islands, the Australian Antarctic Territory, Keeling Cocos Islands, the Territory of Ashmore and Cartier Islands, the Heard and McDonald Islands, the Republic of Nauru, Tuvalu and Kiribati and the Territory of Coral Sea Islands,.

Current Global Status

Currently, the Australian dollar is the sixth-most-traded currency in the world foreign exchange markets and accounts for somewhere around 4–5% of foreign exchange transactions. Nicknamed the Aussie, its popularity with forex traders is due to Australia's high interest rates, the lack of intervention by the Australian government, the general stability of the Australian economy, and the popular view that it diversifies a portfolio containing the major currencies because of the Aussie's exposure to Asian economies. In December of 1983, the Australian government floated the Australian dollar. Since then, movements in the Australian currency reflected the debits and credits in the payment balance. The currency's high currency exposure, volatility and interest swap make the AUD one of the world's most traded currencies, far beyond the economy's actual importance

Against the US Dollar

When the Bretton Woods system broke down in 1971, Australia converted from a generally fixed peg to a moving peg against the US dollar. In 1974, it moved to a peg against a group of currencies, the trade weighted index (TWI), in an attempt to minimize fluctuations caused by its peg to the US dollar. This peg was changed to a moving peg in 1976, which meant that the actual value of the peg had to be adjusted periodically. The highest value of the Australian dollar against the US dollar in the first two decades after it was floated was 0.9668 in 1984, a value which it revisited on 30 June 2008.

Against the Pound Sterling

Australia maintained a peg to the British pound first at par, and then at 0.8 GBP. This was mostly a reflection of the country's historical ties to the British Empire, and to a lesser degree a notion about the stability of the British pound's value. Effectively, the peg to sterling held until 1967. Since then the Australian economy has shifted its focus from Europe to Asia, the Asian pacific and its value against the pound sterling has greatly diminished in importance.

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