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?
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The Australian Dollar, known as the Aussie, is one of the three “commodity currencies” among the most-actively traded currencies in the world. Much of the commodities it produces are exported to China, making the Australian economy (and therefore its currency) highly dependent on Chinese growth.
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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.
Use the interactive chart to the right to check out some of AUD/USD’s most-recent moves.
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