For the past few years the Australian dollar has remained one of the most popular currencies to trade. Its popularity has grown not only due to the rising interest rates in the country but also because of its strong trading relations with other countries. But before you start buying or selling the currency you should understand how the market works.

Commodity prices

Commodity prices can affect the value of the Australian dollar. Australia is a large exporter of coal, iron ore, and agricultural commodities. During times of commodity price collapses, the AUD will depreciate. However, when hard commodity prices are rising, the AUD is generally considered a good investment.

A number of factors influence the AUD/USD exchange rate, such as interest rates, trade relations, and geographical aspects. The Reserve Bank of Australia (RBA) is the main determinant of AUD/USD exchange rate.

Commodity prices are typically exogenous. They affect a country’s economic growth and the demand for Australian commodities. Exporters may decide to increase their output capacity when they see higher prices. Alternatively, they could choose to expand production if they see lower prices.

Commodity price volatility has been a major factor affecting the AUDUSD exchange rate since 2011. Oil and gold prices have been heavily suppressed, while the prices of other commodities, such as copper, iron ore, and coal, have been down.

Interest rate differential

The AUD/USD pair is a popular forex pair, connecting a number of influential economies. This currency pair is known for its high volume and volatility. It is also influenced by interest rate differentials between the Reserve Bank of Australia and the US Federal Reserve.

The AUD/USD is a commodity currency, meaning its value is closely tied to global spot commodity prices. The Australian economy is a major exporter of minerals, iron-ore, coal, and precious metals.

The Aussie Dollar’s value can rise when gold or other commodities appreciate. A stronger dollar may weaken the AUD/USD exchange rate, but an increase in US interest rates could strengthen the currency.

In January, the Reserve Bank of Australia (RBA) cut its interest rate by 0.25 percentage points. While the market was initially surprised, the news of the change has been the driving force behind a modest AUD/USD rally.

In addition to the rate cut, the RBA made it clear that it would continue to expand its bond buying program. As a result, the AUD/USD exchange rate has traded within a 76-78 cent range since.

Trade relations

Australia and the US are two of the world’s most important trading partners. Their relationship has had a major impact on the AUD/USD currency pair.

In the last decade, the Australian economy has seen a huge boost through trade. The country’s exports have increased by over 91% since 2005. This has allowed the economy to avoid a global financial crisis.

The US and Australia have had a close economic partnership for a number of years. Their Free Trade Agreement has resulted in direct US investment of over $1 billion.

As a result, the Australian dollar is influenced by the interest rate differential between the two countries. If the US increases its borrowing costs, it will make the AUD more attractive.

The Australian dollar is also closely linked to the trading relationship between the US and Asia. Historically, these trade relations have propped up the AUD. However, the Chinese recession headlines are providing headwinds to the AUD.

Diverse market

The Australian Dollar (AUD) is a major currency in international markets. Historically, top factors in its appeal have been carry trade and high interest rates. But, as Australia’s economy is largely based on commodities, the value of its dollar is also influenced by rising commodity prices.

The United States is one of the largest trading partners of Australia. Despite Australia’s relatively small size, its economy is growing. Since 2005, US exports to Australia have grown twofold. This trade relationship helps to maintain the country’s economic stability.

Australian dollar exchange rate values are also influenced by trade relations with Asian nations. The AUD/USD is a popular currency pair, making it a great investment opportunity.

Although the Australian economy is relatively small, it has benefited from strong commodity prices. In addition, the Federal Reserve has enacted the Quantitative Easing program and has pledged to raise borrowing costs.

A number of important Australian data releases are released every month. These include retail sales, manufacturing activity and unemployment. Economic reports often trigger big shifts in AUD/USD price movement.