Currency Fundamentals

Currency – Australian Dollar (AUD) 

The Australian Dollar, is a popular currency in forex trading due to several factors:

• Commodity-Price Sensitivity: Australia boasts a rich economy fueled by its massive mining sector. This makes the AUD sensitive to commodity prices, especially those of ores, metals, wool, and livestock that Australia exports. For instance, a rise in gold prices (Australia is a major producer) can lead to an appreciation of the AUD.

• Carry Trade Candidate: The AUD is often used in carry trade strategies due to Australia's historically higher interest rates compared to countries like Japan with ultra-low rates. This interest rate differential can be a source of profit in carry trades, where you borrow a low-interest-rate currency and invest in a higher-interest-rate currency.

• China Connection: China's economic health significantly impacts the AUD. This is because China is a crucial trading partner and export market for Australia. Positive economic data from China can boost the AUD's value.

• New Zealand's Influence: To a lesser extent, the state of New Zealand's economy can also affect the AUD. The close relationship between these trading partners means economic developments in New Zealand can influence the AUD's value.

By understanding these key factors, forex traders can gain valuable insights into potential AUD movements and make informed trading decisions.