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What Moves Aussie Dollar Currency Futures?

audusd price study

The Aussie dollar currency futures is very popular in the currency futures markets. If you plan to trade with this currency, it is important to have a look at its background.

The Australian decimal currency was introduced in 1966 to replace the Australian pound. The exchange rate at that time was set at $2.50 to the sterling pound. In 1967, Australia stopped pegging its currency to the sterling pound and pegged to the US dollar at a rate of 1 Australian dollar=1.12 US dollars. 

It is worth noting that the paper currency is made from polymer, which makes counterfeiting difficult.

Daily Australian Dollar Prices (CME)

Chinese Economy Affects Aussie Dollar Currency Futures

The Australian economy is highly dependent on the extraction of mineral resources. 43 percent of mineral trading is done with north Asia while Southeast Asia accounts for 15 percent. The Chinese are also the biggest investors in the mineral extraction industry in Australia. 

This demand from China has been used by many traders as a signal to trade in Aussie dollar currency futures.

Price Of Commodities

The rise of commodity prices leads to inflationary pressures in most developed countries. This is because the manufacturing sector is expected to suffer as raw commodities inputs became more expensive. The Australian dollar gains from currency futures traders taking long positions in Aussie dollar currency futures and shorting the currencies of affected countries.

audusd point and figure chart

Carry Trades

Because of the high interest rates, the Aussie dollar currency futures are a favorite of carry traders. Carry trades are taking long positions in the Aussie dollar versus a currency of a lower interest rate. Most of these are in Japanese yen, which has the lowest interest rate.

The carry trader profits from the interest gained overnight, and the gains in the Aussie dollar. Held over a long term, this is a simple strategy that guaranteed respectable profits.

Trade Balances

The flow of money out or into Australia affects the exchange rate of the Australian dollar. The outflow of Australian dollars puts downward pressure on the currency. This leads to a weakening of the currency on the global market. The opposite is true for the Australian dollar.

Inflationary Forces

High rates of inflation would make imported goods cheaper than locally produced goods. This would result in huge outflows of the Australian dollar as foreign goods are being purchased, leading to negative impact on the exchange rate.

Speculation On The Aussie Dollar Currency Futures

Speculation can affect the exchange rate significantly. In a situation where speculators are convinced the economy will falter, the Australian dollar will be sold. This will exert negative pressure on the currency leading to its value falling.

Regional Economies

Due to its strong ties to Asian economies, it is important to look at the demand of resources in India, Japan, and China. In the past, demand for commodities in these regions has an effect in the state of the Australian dollar.

Active Hours To Trade In The Aussie Dollar

In general, the most active trading hours are between the opening of the London markets at 8:00 GMT and the closing of the US market at 22:00 GMT. During this period the markets are busiest from 13:00 GMT to 16:00 GMT.

Government Intervention On The Aussie Dollar Exchange Rate

The reserve bank of Australia has raised interest rates by 0.25 percent. Analysts however expect the rates to be further raised to between 4.5 percent and 6 percent. The RBA expects to keep inflation between 2-3 percent. In addition the unemployment rate has fallen to 5.3 percent. This is good news for the Aussie dollar currency futures.

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