What is an Aussie

Aussie is a slang term that refers to the Australian dollar. Many countries use the word dollar for their own currency, such as Canada, the U.S., Hong Kong and more than a dozen others. To avoid confusion, the Australian dollar is sometimes called the Aussie to distinguish it from all the other dollars, similar to how the U.S. dollar is sometimes called the greenback or the Canadian dollar is called the loonie. The Australian dollar is also denoted as $, A$, AU$ or AUD.

BREAKING DOWN Aussie

Aussie, or the Australian dollar, is the informal name for the currency of the Commonwealth of Australia, including Norfolk Island, Christmas Island and the Cocos Islands. It is also frequently used in the independent Pacific island states of Nauru, Tuvalu and Kiribati. The Tuvaluan dollar and the Kiribati dollar are pegged to the Aussie at par. The Aussie is a decimal currency, subdivided into 100 cents. Coins are minted in denominations of 5, 10, 20 and 50 cents, as well as $1 and $2. Banknotes are printed in denominations of $5, $10, $20, $50 and $100.

Australia supplanted the Australian pound with the Australian dollar in 1966. After trying a number of types of currency pegs, Australia’s government floated the Aussie in 1983, allowing the currency’s value to fluctuate in accordance with global supply and demand. Since then, the Aussie has become a reserve currency in the Asia-Pacific region. As of April 2018, it is the seventh-most-traded currency in the world, trading at a level that is disproportionate to the size of Australia's economy.

Geology, Geography and Government Policy

The Aussie's popularity with currency traders is a result of three primary factors: geology, geography and government policy. Australia is rich in natural resources, such as oil and gold. Its utilization of these resources provides a strong foundation for the nation's economy, but it also causes the currency’s strength to fluctuate along with the movement of global commodity prices. For instance, in early 2016, the Aussie fell to a multiyear low due to a steep decline in the global oil prices.

The Aussie's value is heavily associated with Australia's geography; the nation’s location makes it a major trading partner with China, along with fast growing economies in the region, including Vietnam and South Korea. Part of the Aussie's decline during this time was attributed to the decline in these nation's stock markets and currencies during 2015 and 2016.

The Aussie is also favored in global currency markets because the policies of it government is broadly considered to be conducive to stability in interest rates and monetary policy. In addition, the Australian government and its central banks have a tradition of non-interventionism, and the country has a strong rule of law and a Western approach to conducting business.