Because Australia tends to have relatively high interest rates, its currency is a favorite benefactor of the carry trade, where investors borrow low interest rate currencies and convert them to high interest rate currencies. That gives the Australian Dollar a tailwind in good economic times, but can be a burden in challenging times. Which time are we in?
Get an in-depth view of what is driving forex markets right now.
USD/JPY is a safe-haven currency. Thanks to the low (even negative) interest rates in Japan, global investors can borrow Yen and convert it to other currencies, called a carry trade. As more and more investors do this, the exchange rate works to juice returns. The risk: uncertainty will cause everyone to rush for the exit of this trade at once and undo years of gains.
Watch our video primer for what you need to know to successfully get started trading AUD/USD.
In 2018, AUD/USD entered a downtrend, as evidenced by a series of lower highs and lower lows that brought the currency down from above 0.81. The price is definitely not helped by ongoing tensions between the United States and China since the Australian economy is so dependent on a vibrant Chinese economy.
Learn to engage in and profit from financial markets