AUD/USD (Australian Dollar/U.S. Dollar)
- The abbreviation for the Australian dollar and U.S. dollar (AUD/USD) currency pair or cross. The currency pair tells the reader how many U.S. dollars (the quote currency) are needed to purchase one Australian dollar (the base currency)
Trading the AUD/USD currency pair is also known as trading the "Aussie".
The value of the AUD/USD pair is quoted as 1 Australian dollar per X U.S. dollars. For example, if the pair is trading at 1.50 it means that it takes 1.5 U.S. dollars to buy 1 Australian dollar.
The AUD/USD is affected by factors that influence the value of the Australian dollar and/or the U.S. dollar in relation to each other and other currencies. For this reason, the interest rate differential between the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed) will affect the value of these currencies when compared to each other. When the Fed intervenes in open market activities to make the U.S. dollar stronger, for example, the value of the AUD/USD cross could decline, due to a strengthening of the U.S. dollar when compared to the Australian dollar.
The AUD/USD tends to have a negative correlation with the USD/CAD, USD/CHF and USD/JPY pairs because the AUD/USD is quoted in U.S. dollars, while the others are not. The correlation with USD/CAD could also be due to the positive correlation of the Canadian dollar and the Australian dollar (because they both have similar economic structures because they are both resource-based economies).
Investment dictionary. Academic. 2012.
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