DEFINITION of 'AUD'
AUD is the abbreviation for the Australian dollar, also known as the Aussie dollar or the Aussie, in the international currency market. AUD replaced the Australian pound in 1966, and 2016 marks its 50th anniversary as a currency. As of April 22, 2016, the value of AUD is approximately $0.77 against the U.S. dollar.
BREAKING DOWN 'AUD'
The Australian dollar is the official currency not only of the country of Australia but also of a number of independent countries and territories in the South Pacific, including Papua New Guinea, Christmas Island, the Cocos Islands, Nauru, Tuvalu and Norfolk Island. The most recent estimate as of April 2016 places the Australian foreign exchange market as the eighth largest in the world, with about half the turnover against AUD and the other half in various currencies against the U.S. dollar. Additionally, AUD has significant turnover in other global markets, which makes it overall the world's fifth-most-traded currency.
History of AUD
Australians first bartered with commodities as currency, but the first real Australian currencies were created after the discovery of gold in 1851. State treasuries and commercial banks created their own banknotes backed by gold. The Australian pound became the national currency in 1910. To simplify international transactions, Australia eliminated the monetary system of pounds, shillings and pence and switched to the new decimal currency of AUD on Feb. 14, 1966.
The first banknotes created in 1966 and 1967 included denominations of $1, $2, $5, $10 and $20. The $1 and $2 denominations were subsequently converted to coins, and $50 and $100 denominations of banknotes were added. AUD banknotes are printed on polymer plastic to make them more difficult to counterfeit.
Value of AUD
At first, AUD was pegged on par with the British pound sterling, and later it was pegged with the U.S. dollar. In 1983, the AUD converted to a floating exchange rate against the U.S. dollar. Its value fluctuates according to factors such as U.S. interest rates and international commodity prices, especially of iron ore and other metals.
In the beginning of April 2016, the Australian central bank became upset by what seemed to be an upturn in the value of the AUD, as a stronger AUD would involve a drop in commodities prices, a rise in inflation and a slowing of economic progress. However, the trend relaxed later in the month due to the strength of the U.S. dollar, a drop in crude oil prices and investors moving away from AUD in favor of the Japanese yen.