The AUD/USD Currency Pair (Australian Dollar / U.S. Dollar) is the exchange rate of Australian Dollar expressed in U.S. Dollars. It expresses the value of one Australian Dollar in U.S. Dollar.
Because Australia is the world’s third largest exporter of gold, the Australian dollar has an 80% positive correlation with this metal. If you believe the price of gold will continue to increase, you could favor a commodity-based economy like Australia because if gold rises, the Australian Dollar is very likely to follow it’s lead.
The AUD/USD represents less than 6% of total transactions on the FOREX in 2010 and is the 4th most traded parity in 2010 behind the EUR / USD, USD / JPY and GBP / USD. The pair AUD/USD is deemed to be related to changes in gold prices. Actually, Australia is the 3rd largest gold producer in the world and as such, when gold prices decline, the Australian dollar decreases. It was found a positive correlation of 84% with gold between 1998 and 2008.
The Australian dollar has also a strong positive correlation with the New Zealand Dollar with nearly 96% between the AUD/USD and the NZD / USD. This can be explained by the fact that Australia is a preferred business partner because of its proximity. If Australia is economically healthy, exports from New Zealand will increase and this will have a beneficial effect on economic growth.
The pair AUD/USD is quoted in 2 decimal places but you can sometimes find 3 with some brokers. The exchange rate is floating and therefore subject to the law of supply and demand on the interbank forex market. Its daily volatility in 2008 was about 200 pips.