Our Currency Spotlight this week shines on the Australian dollar. The Australian dollar is the currency of – no prizes for guessing – Australia, as well as 7 Australian territories and 4 independent countries.
Fast Facts: Australian dollar
- Australian Dollar Symbol: $, (or A$)
- Australia Currency Code: AUD
- Coins: 5¢, 10¢, 20¢, 50¢, $1, $2
- Notes: 5,10,20,50,100
- Australia’s GDP: $1.56 trillion
- Central Bank: Reserve Bank of Australia
Australia replaced the Australian pound (which had been adopted in 1910) with a decimal currency – meaning, like Canada, $A1 is worth 100¢ – on February 14, 1966. Suggestions for the name of the new currency flooded in from around the country: the oz, the ming, the quid, the emu, the roo, the kanga, the austral and the dinkum. Somewhat unsurprisingly, none of these more creative monikers were chosen, instead the Prime Minister, Sir Robert Menzies suggestion – the royal – was adopted. Eventually the royal grew unpopular and was dropped for the current name: the Australian dollar. The Australian dollar was first pegged to the British pound sterling but this lasted for only one year before a US dollar peg was implemented at a rate of A$1 = US$1.12.
Counted among Australia’s coins are some undeniably strange and unique pieces. In 1966 the 50¢ coin was redesigned because it contained 80% silver, making the coin itself more valuable than the denomination it represented. A$1 and A$2 coins were introduced in 1984 and 1988 respectively, while 1¢ and 2¢ coins were discontinued in 1991 – so like Canada, cash exchanges are rounded to the nearest 5¢. Also like Canada, and most other commonwealth countries, Queen Elizabeth II is on the back of each coin. In 2013, Australia minted triangular A$5 coins to commemorate the 25th anniversary of the opening of Parliament house. The Australian 50¢ coin is one of the largest in circulation, weighing in at 15.55 grams and standing 31.41 mm tall.
The first polymer Australian bills were printed in 1988 and, in 1996, Australia began exclusively using polymer notes, which are more durable and harder to forge. In fact, Note Printing Australia (a subsidiary of the Reserve Bank of Australia) now prints polymer notes for Canada, Bangladesh, Brunei, Chile, Kuwait, New Zealand and many more countries.
The Australian dollar is the 5th most traded currency by value, sitting behind the US dollar, the euro, the Japanese yen, the pound sterling. Beginning in 1967, the Australian dollar was pegged to the US dollar. Because of this, the highest value reached by the Australian dollar – $1.4885 – was in 1973 when the pegged rate was adjusted to a limited range around the US$1.485 mark.
Since the Australian dollar was floated in 1983 the highest value it has reached was $0.881 in 1988 and the lowest was 47.75¢ US in 2001. By June 2008 the AUD bounced back to 96¢ USD and in 2010 the AUD briefly reached parity with the USD.
The Australian economy, and therefore the value of the Australian dollar, is heavily dependent on commodity prices. As a result the Australian dollar usually closely follows the business cycle – in times of global growth the dollar rallies, but when growth stalls the dollar falls.
The Australian dollar’s vulnerability to global market trends is due in part to the fact that the mining sector is responsible for some 19% of Australia’s GDP. Iron ore is of particular importance to Australia’s economy as Western Australia is home to 22% of the world’s reserves. By far the largest consumer of these resources is China – which imports 70% of Western Australia’s iron ore – and as a result any slowdown in the Chinese economy hits Australia hard.
Overall the Australian dollar is a popular currency with traders and investors. Australia’s central bank is noted as being generally non-interventionist and the Australian economy, despite some vulnerability to commodity prices, is generally strong and stable.
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