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Currencies |
| AUSTRALIAN DOLLAR |
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| Introduction
| Overview | Structure
| History | Factors
affecting change in exchange rates | Daily
trend of Australian dollar | Weekly
trend of Australian Dollar |
| Introduction |
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Australian dollar is yet another dollar currency that stands among
the six important most currencies in the world. As the name
suggests, Australian dollar serves as the national currency of the
Commonwealth of Australia and also of Christmas Island, Cocos
(Keeling) Islands, Norfolk Island, Heard and Mc Donald Islands,
Australian Antarctic Territory and pacific island states that
include Kiribati, Nauru and Tuvalu. Sometimes also called the
"Pacific Peso" and "Aussie battler", the
currency is denoted with the sign of dollar i.e. $. In daily
transactions, the Australian dollar is also sometimes denoted as
A$, $A, AU$ or $AU so as to distinguish it from the other dollar
currencies.
The Australian dollar was introduced in 1966 replacing the
Australian pound. It is the first complete polymer note based
currency and is subdivided into 100 equal cents. The currency and
the numeric codes for Australian dollar the ISO 4217 regulation
has described are AUD and 036 respectively.
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Overview
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Australian dollar has been the most impressive currency in the
world in the recent times. It is the sixth most heavily traded
currency in the world after United States dollar, Euro, Japanese
yen, the British pound and the Swiss franc. Statistically, it
accounts for approximately 5% of the total volume of foreign
exchange transactions around the globe i.e. around 1.9 trillion
dollars a day. The facts that Australia has arguably one of the
most stable economies in the world and intervention of the
government is negligible when it comes to country’s currency,
provide with the reason for this staggering demand of Australian
dollar in the world market. The currency is also entitled as the
first currency in the world that transformed its currency system
into a system totally based on polymer banknotes. Few of the below
mentioned economies have even dollarized their currencies in terms
of the Australian dollar
Australia being the second largest producer
of gold in the world, its currency also is greatly affected from
it and hence it is said that the Australian dollar is a commodity
based currency. Any fluctuations in the sales of gold directly
influence the value of the currency. Though currently, the value
of the currency operates upon a floating rate regime but still it
stays related to the value of gold. It was pegged to the US dollar
on fixed basis soon after its inception but when the Bretton Woods
system collapsed, it moved to a floating peg to the US dollar.
Soon after the peg was made to a basket of currencies and finally
the currency was floated in 1983. Australian dollar is able to
attract the investors and speculators as the value is expected to
fluctuate with the market sentiments. In a portfolio having the
major currencies of the world, having the Australian dollar
provides diversification to the investor as it is comparatively
closely related to the Asian economies as well. The import and
export of the currency is totally free, but a declaration has to
be made if the amount imported or exported exceeds 10000
Australian dollars.
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Structure
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The inception of the Australian dollar in the
year 1966 not only provided for a new currency
to the country but it also introduced the
decimal system in the currency, as Australian
pound that was used prior to the dollar did not
have subdivisions according to the decimal
system. The smaller denominations in the
currency are issued in coinage totaling up to 6
denominations that are 5, 10, 20, 50 cents, 1
dollar and 2 dollars, coins minted by the Royal
Australian mint. All the coins depict an image
of Queen Elizabeth II on their front sides.
Previously 1 and 2-cent coins were also issued
but their circulation was halted in the year
1991-92. That is why the current transactions
are rounded to nearest 5 cents. With this
currency coinage, many commemorative coins of
various denominations including 20˘, 50˘ and
$1 had also been produced in the past and are
still produced. The recent addition to the long
list of commemorative coins was the set of coins
proof and uncirculated that was issued by the
royal mint.
The bank notes are printed
under the authority of the central bank of the
country i.e. Reserve Bank of Australia. It also
watches over the circulation of the currency as
well as the coinage. Initially at the time of
introduction of the currency in the country,
whole series of paper bank notes was issued
showing portraits of important persons in the
history of Australia. These notes had exact
exchange rates in terms of pounds excluding the
$5 note and that’s why it was issued much
later. In 1988, for the first time, the reserve
bank issued polymer notes, though not as
currency bank notes but as commemorative note.
Due to the edge the polymer currency notes have
over the paper currency notes security and
strength wise, a whole series of bank notes was
produced from polymer and is still used. The
bank notes are issued in 5 denominations namely
$5, $10, $20, $50 and $100, the size of the note
getting bigger with the value of the currency.
The colors of the notes also vary with different
denominations such as the $5 note is violet pink
in color, $10 note is blue, the $20 note is
orange in color, $50 note is yellow in color and
the $100 note is green in color.
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| History |
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Australia, in terms of currency, has a long history as
the country had been using various currencies and the
Australian dollar was incepted much later on 14th
February 1966. When the country was at its
establishment phase, much of the exchange was done
through barter and the currency situation was much
chaotic. Till the 20th century the Australian colony
was dependent upon the currencies of foreign countries
mostly the British pound, but in 1901, with the
independence of the country, the government started to
make way for a new currency. In 1910, Australian pound
was adopted as the national currency of the new nation
that was supported by the establishment of the
Commonwealth Bank in 1911. It was based on the British
shilling pence system of subdivisions. Early attempts
were made to issue banknotes of the new currency and
even some notes but on the whole the newly formed
country was not really prepared to issue banknotes of
standard quality. In 1920s, the commonwealth bank was
provided with extra banking powers including the
responsibility to print banknotes according to the
reforms taken due to deteriorating financial and
economic conditions of the country.
In 1960, a new separate bank came
into existence with the adoption of decimalization
concept in the currency that was called the Reserve
Bank of Australia. It started to prepare to make way
for a new decimal currency and after six years, the
Australian dollar was incepted on 14th February 1966.
During these six years, a new controversy arose
regarding the name of the currency to be incepted.
Even a public naming competition was held to suggest
the name of the currency in which suggestions like
'Oz', 'Boomer', 'Roo', 'Kanga', 'Emu', 'Koala',
'Digger', 'Zac', 'Kwid', 'Dinkum' and 'Ming'. As there
was no clear consensus about the name, the government
suggested it to be "Royal", but even that
name was opposed as the "Royal" designs were
not completed on time. finally a quick decision in
1963 was taken and dollar was decided as the
currency’s name. The value of the Australian dollar
was set at $2 = 1 or 10 shillings = $1. The dollar
maintained a fixed peg to the US dollar till 1971 when
Bretton Woods sytem collapsed. Australian currency
shifted to a moving peg to US dollar for a few years,
then to a basket of currencies and at last in 1983,
adopted a floating rate regime. From 1988 onwards, the
reserve bank started making efforts to switch over to
polymer bank note based currency system and earned
success in 1992 when a complete series of notes was
issued.
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| Factors
affecting the exchange rates between two countries
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The volatility in the foreign exchange rates
depends upon a numerous macro economic factors that
have different degrees of importance to different
economies of the world. Some special and exceptional
factors affecting the rates may also exist in the case
of different countries. Following are shown the common
factors on which the foreign exchange rate depends
- Flow of imports and exports between the
countries
- Flow of capital between the countries
- Relative
inflation rates
- Fluctuation limits on exchange rate
imposed by the governments of the countries
- Merchandise trade balance
- Rate of inflation in the country
- Flow of
funds between the countries for the payment of
stock and bond purchases
- Relative growth
- Short term
and long term interest rate differentials
- Cost of borrowings
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