Provide Some Facts About The First Currency In Your Chosen Q

Provide some facts about the FIRST currency in your chosen quote

This assignment requires selecting a currency quote, such as AUD/USD or USD/AUD, and providing detailed facts about the first currency in the chosen quote. For example, if the quote is AUD/USD, the facts should focus on the Australian Dollar (AUD). Conversely, if the quote is USD/AUD, the facts should be centered on the US Dollar (USD).

The required facts include whether the currency is fixed or floating, historical context such as when this regime was adopted, the level of trading activity (liquidity and volume), how the currency's stability compares with other major currencies, and notable features or unique characteristics that influence its exchange rate behavior. A thorough analysis should also consider the currency's role in international trade, its reserve currency status, and any relevant government policies affecting its value. This comprehensive overview should be approximately 250 words, providing a clear understanding of the selected first currency’s background and significance in the global financial system.

Paper For Above instruction

The Australian Dollar (AUD) serves as the official currency of Australia and several other territories and nations in the Asia-Pacific region. It is a floating currency, meaning its exchange rate is determined by market forces such as supply and demand without direct government intervention. Introduced in 1966, replacing the Australian Pound, the AUD was initially pegged to the British Pound but transitioned to a flexible exchange rate system in the early 1980s after the floating regime was adopted as part of broader economic reforms (Australian Government, 2020). Since then, the AUD has become one of the most actively traded currencies in the world, particularly in the commodity markets, reflecting Australia's rich resource endowment, which includes minerals and energy exports like coal, iron ore, and natural gas (Australian Bureau of Statistics, 2021).

The AUD is regarded as a commodity currency, largely influenced by global commodity prices and China's economic health, Australia's largest trading partner. Its liquidity is high, with significant daily trade volume on foreign exchange markets, making it the fifth most traded currency globally (BIS, 2023). Compared to majors like the USD or EUR, the AUD experiences more pronounced volatility driven by global commodity cycles, monetary policy shifts by the Reserve Bank of Australia, and geopolitical factors. Importantly, the Australian dollar benefits from its status as a reserve currency within the region and is included in the IMF Special Drawing Rights basket, underscoring its importance in international finance (IMF, 2022). The currency’s stability is supported by Australia's sound macroeconomic policies, fiscal discipline, and the country’s stable political environment, making the AUD a crucial player in the international monetary landscape.

References

  • Australian Bureau of Statistics. (2021). International Trade in Goods and Services. https://www.abs.gov.au
  • Australian Government. (2020). History of the Australian Dollar. https://www.ato.gov.au
  • Bank for International Settlements (BIS). (2023). Triennial Central Bank Survey of Foreign Exchange and OTC Derivatives Market Activity.
  • International Monetary Fund (IMF). (2022). IMF Currency Composition of Official Foreign Exchange Reserves (COFER). https://www.imf.org

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