AUD/USD (sometimes just AUDUSD) stands for the currency pair or cross rate of the Australian dollar to the US dollar.

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AUD/USD

Concept

AUD/USD (sometimes just AUDUSD) stands for the currency pair or cross rate of the Australian dollar to the US dollar.

A currency pair tells the viewer how much it takes to buy another. In this case, the Australian dollar (abbreviated as AUD) is the base currency and the US dollar (abbreviated as USD) is considered the quote currency, or face value of the quote.

Understand AUD/USD

AUD/USD represents the rate at which US dollars are converted to Australian dollars. The value of the AUD/USD currency pair quoted is 1 Australian Dollar per X US Dollar.

For example, if the currency pair is trading at 0.75, it means that it takes 0.75 USD to buy 1 Australian dollar.

Trading the AUD/USD currency pair is also known as “Aussie” trading. So sometimes you can hear a trader say “We bought the Aussie at 7495 and it went up 105 pips to 7600”.

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The AUD/USD currency pair is affected by factors that affect the value of the Australian dollar or the US dollar, in relation to the two currencies or to other currencies. This includes geographical factors such as commodity production (coal, iron ore, copper) in Australia, political factors such as the business environment with China (which is a big customer for Australian goods). ), and the impact of interest rates.

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The interest rate differential between the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed) will also affect the value correlation between the two currencies.

For example, when the Fed’s intervention in the market causes the US dollar to weaken, the value of the AUD/USD currency pair will increase.

The reason is that the action of the Fed has moved more dollars into the circulation system of banks and increased the supply of US dollars, causing the value of the US dollar to be depressed. Assuming there are no other changes, the Australian dollar remains in its value, now the value relationship of the currency pair increases because the Australian dollar is stronger when compared to the US dollar. US dollars.

As Australia is the largest exporter of coal and iron ore, the price movement of the Australian dollar is highly dependent on commodity prices. During the commodity price downturn of 2015, when oil prices hit a decade low and coal and iron ore prices also fell. Not surprisingly, the Australian dollar has weakened considerably. It has lost 15% of its value in the US dollar, and has almost reached parity with the New Zealand dollar. This is a level not seen since 1970.

The AUD/USD currency pair is often negatively correlated with the USD/CAD, USD/CHF and USD/JPY pairs because the AUD/USD pair is quoted in USD, while the other pairs are not. The correlation with USD/CAD is similar because of the positive correlation between the Canadian and Australian economies (both resource dependent).

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The AUD/USD currency pair is the fourth most traded currency pair in the world but is not among the six pairs that make up the US dollar index.

(According to Investopedia)