Australia’s stable government policy, unique geographic position near Asian economies and abundance of natural resources, including gold and oil, helps it to punch above its weight in terms of trading volume on forex markets.
The Australian dollar is regularly among the top five most frequently traded currencies, and it is paired most often with the US dollar (USD), though other options including the Mexican peso (MXN), South African rand (ZAR) and British pound (GBP) are also popular.
AUD/USD
This is the fifth most most-traded pair and accounts for approximately 5% of the market by volume on any given day. The Australian dollar in this trade is the base currency, and thus, the price is based on how many US dollars you can buy with a single Australian dollar.
The factors that influence this trade include trade relations and the interest rate differential. The two countries are close economic partners with the Australia-United States Free Trade Agreement (AUSFTA) acting as the foundation for the relationship. The interest rates of both countries are determined by the respective reserve banks.
Traders like to trade AUD to USD for several reasons, including Australia’s export-driven economy, which supports economic growth and a rising GDP, higher interest rates that make the currency more appealing and AUD’s recent 30% uptick against USD. The Australian is a top performer among major currencies.
AUD/JPY
The Australian dollar and Japanese yen is a minor pair but can be traded effectively with the right strategy. AUD/JPY is one of the best ‘carry’ trades, where a currency with a low interest is borrowed to purchase a currency with a higher interest rate. The difference between interest rates is the greatest between Australia and Japan compared to other major currencies.
Experts recommend trading AUD/JPY long during the first round before changing it up with trade on short signals during the second round. Finish up with long and short signals during a third and final round.
GBP/AUD
The GBP/AUD pair is another pair that makes up a large portion of daily trades and is popular with veterans and beginners. You can trade the British pound to the Australian dollar using a forex contract or trading on CFDs to speculate the difference in price. A CFD is a financial instrument available via a broker where you agree to pay the difference in a security’s value. You can either speculate that the price will go higher (long) or lower (short). Check Alpari reviews to see if the trading options you require are available with a broker.
AUD/MXN
Exotic trades like the Australian dollar and Mexican peso are also gaining traction with traders. The peso is the most popular currency in Latin American trading and is often overlooked as an option for daily forex traders in the west, especially as it offers both short-term and long-term opportunities. The trading volume for this pair has soared recently, so it may be a good one to track in the coming weeks and months.
A few other financial instruments worth mentioning are AUD/ZAR, which has one of the highest trading volumes, AUD/NZD, AUD/CHF and AUD/CAD.
