Everything about Australian Dollar totally explained
The
dollar is the
currency of the
Commonwealth of Australia, including
Christmas Island,
Cocos (Keeling) Islands, and
Norfolk Island, as well as the independent
Pacific Island states of
Kiribati,
Nauru and
Tuvalu. The Australian dollar's
ISO 4217 code is
AUD but it's often abbreviated with the
dollar sign $.
A$ or
AU$ is often used informally to distinguish it from other
dollar-denominated currencies. It is subdivided into 100
cents.
The Australian dollar is currently the sixth-most-traded currency in world
foreign exchange markets (behind the
euro,
US dollar, the
yen, the
pound sterling, and the
swiss franc), accounting for about 4–5% of worldwide foreign-exchange transactions. The Australian dollar is popular with currency traders due to high interest rates in Australia, the relative freedom of the foreign exchange market from intervention by the Australian government, the general stability of the economy and political system, and the prevailing view that it offers diversification benefits in a portfolio containing the major world currencies (especially because of its greater exposure to Asian economies and the commodities cycle).
History
The dollar was introduced on 14 February 1966, replacing the duodecimal
Australian pound (distinct from the
pound sterling since 1929) with a
decimal currency.
The royal
In 1965, the
Prime Minister,
Robert Menzies, wished to name the currency "the royal" and other names such as "the austral", "the oz", "the boomer", "the roo", "the kanga", "the emu", "the digger", "the kwid" and, jokingly, "the ming" (the nickname of Menzies) were also proposed. Due to Menzies' influence, the name "royal" was settled on, and trial designs were prepared and printed by the
Reserve Bank of Australia. The choice of name for the currency proved unpopular, and it was later shelved in favour of "dollar".
The dollar
On
14 February 1966 the dollar was introduced at a rate of two dollars per pound, or ten
shillings per dollar. At its introduction, it was pegged to sterling at a rate of 1 dollar = 8 shillings (2.5 dollars = 1 pound). In 1967, Australia effectively left the sterling area for the first time. When sterling devalued in 1967 against the U.S. dollar, the Australian dollar didn't follow. It maintained its peg to the U.S. dollar at the same rate of 1 Australian dollar = 1.12 U.S. dollars.
Coins
In 1966, coins were introduced in denominations of 1, 2, 5, 10, 20 and 50 cents. One-dollar coins were introduced in 1984, followed by two-dollar coins in 1988. The one- and two-cent coins were discontinued in 1991 and withdrawn from circulation. Cash transactions are rounded to the nearest five cents. As with most public changes to currency systems, there has been a great amount of
seignorage of the discontinued coins. All coins portray the head of state, Queen
Elizabeth II on the obverse, and are produced by the
Royal Australian Mint.
Australia has regularly issued commemorative 50-cent coins. The first was in 1970, commemorating
Captain Cook's exploration along the east coast of the Australian continent, followed in 1977 by a coin for
Queen Elizabeth II's
Silver Jubilee, the wedding of
Charles and
Diana in 1981, the
Brisbane Commonwealth Games in 1982, and the
Australian Bicentenary in 1988. Issues expanded into greater numbers in the 1990s and the 21st century, responding to collector demand. Australia has also made special issues of 20-cent and one-dollar coins.
There are many five-dollar coins, of
aluminium/
bronze and
bi-metal, and many silver and gold
bullion coins in higher denominations. These, like the US coins of higher denomination than one dollar or which are made of precious metals, are not normally used in payment, although they're
legal tender.
Current Australian 5-, 10- and 20-cent coins are identical in size to the former Australian, New Zealand and British sixpenny, shilling and two shilling (florin) coins. In 1990. the UK replaced these coins with smaller versions, as did New Zealand in 2006 - at the same time discontinuing the five-cent coin. With a mass of 15.55 grams and a diameter of 31.51 mm, the Australian 50-cent coin is one of the largest coins in circulation today.
Banknotes
First series
The first paper issues of Australian dollars were issued in 1966. The one, two, ten and 20-dollars bills had exact equivalents in the former pound banknotes. The five-dollar note was issued in 1967, after the public had become familiar with decimal currency. There hadn't previously been an equivalent £2 10s note.
The one-dollar note was replaced by a coin in 1984, while the two-dollar note was replaced by a coin in 1988. The 50-dollar note was introduced in 1973 and the 100-dollar note in 1984.
Polymer series
In 1988, the Reserve Bank of Australia issued plastic, specifically
polypropylene polymer banknotes (produced by
Note Printing Australia), to commemorate the bicentenary of European settlement in Australia. These notes contained a transparent window with an optically variable image of Captain James Cook as a security feature. Australian banknotes were the first in the world to use such features. All Australian notes are now made of polymer.
To understand how polymer banknotes are made, see: http://nz.youtube.com/watch?v=YTggA4jVPj0
Value of the Australian dollar
The highest value of the Australian dollar since it was floated was 96.68 US cents on 18 March 1984. In 2001, the value of one Australian dollar went below 50 US cents for the first time, touching 47.75 US cents in April 2001. On 21 May 2008, the Australian dollar reached a 24-year high against the US dollar, peaking at 96.49 US cents.
In 1966, when the Australian dollar was introduced, the International
gold standard still operated. The dollar was at that time worth 980 mg of gold. As of February 2008 the dollar was worth 30 mg of gold.
Exchange rate policies
Australia maintained a
peg to the British pound at par then at 0.8 GBP (16 shillings sterling). This reflected its historical ties as well as a view about the stability in value of the British pound. From 1946 to 1971, Australia maintained a peg to the US dollar under the
Bretton Woods system, but it was effectively pegged to sterling until 1967.
With the breakdown of the Bretton Woods system in 1971, Australia converted the mostly fixed peg to a moving peg against the US dollar. In September 1974, Australia moved to a peg against a basket of currencies called the
trade weighted index (TWI) in an effort to reduce fluctuations associated with its peg to the US dollar. The peg to the TWI was changed to a moving peg in November 1976, causing the actual value of the peg to be periodically adjusted.
On 9 December 1983, the
Australian Labor government led by
Prime Minister Bob Hawke and
Treasurer Paul Keating "
floated" the Australian dollar. From that point, movements in the Australian dollar continued to roughly reflect the strength of its terms of trade.
For decades, Australia's reliance upon commodity (mineral and farm) exports has seen the Australian dollar rally during global booms, and fall when mineral prices slumped or when domestic spending overshadowed its export earnings outlook. The currency's high volatility, currency exposure and interest swap has made the AUD one of the most traded currencies in the world, far in excess of the economy's importance (2% of global economic activity).
Further Information
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