The Australian Dollar – Fifth Most Traded Currency
While the look of Australian currency reflects the nation’s rich heritage, its history reflects the dependence of other nations for Australian commodities.
Before getting its official name, Australians in 1965 were bouncing around names like ‘the oz’, ‘the roo’ and ‘the kanga’ for their currency. The “royal” won over, but due to unpopularity of the name, Australian’s have been trading with dollars for close to 50 years. Inside of Australia it is abbreviated to a dollar sign ($) but will sometimes appear as A$ in order to distinguish it from other country’s dollar currencies.In the foreign exchange market (Forex) the Australian dollar (AUD) is the fifth most traded currency around the world. Investors like the AUD because of Australia’s interest rates, economic stability and a freedom in the Forex market from government intervention. Colloquially known as the “Aussie”, the Australian currency is also favoured due to its exposure to Asian economies and the commodities cycle.
Up until 1971 the AUD was at a fixed exchange rate, initially with the pound sterling before being pegged against the USD in 1946. When the Bretton Woods system broke down, Australian switched to a fluctuating exchange rate against the USD. As a floating currency, it has become one of the five most traded in the world, and is often known as the commodities currency due to the large number of natural resources exported by Australia.
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Value and exchange rate of the Australian dollar
When first introduced in 1966, the Australian was at fixed rate under the Bretton Woods system, which had been established after World War II and governed almost all international currency rates. This exchange rate used the US dollar (USD) as its standard, yet the AUD was pegged to the pound sterling (GBP) at approximately the value of one gram of gold.
During the subsequent peg to the USD in the 1970’s, the AUD reached its highest valuation relative to the United States currency. The peg was adjusted to $1.487 USD on September 9, 1973 and on the 7th and 10th of December that year the AUD reached its high point of $1.488 USD. This rise in value can be partly attributed to a weakening United States economy as it struggled against the effects of the oil crisis.
The Australian dollar was introduced in 1966 to replace the Australian pound. At the time, the dollar was maintained under the Bretton Woods system, a monetary management system that established the rules for the commercial and economic relationships among the US, Canada, Western Europe, Australia and Japan.
Under the Bretton Woods agreement, currencies were pegged to the price of gold, with the US dollar a reserve currency linked to gold. But the Australian dollar was effectively pegged to the British pound under this agreement.
The global financial crisis in 2008 had an effect on both the Australian dollar and British pound. The Australian dollar reached highs of 2.474488 per pound in October 2008 from 2.065693 per pound in July 2008. By August 2009 the Aussie dollar had dropped to under two dollars per pound. And in 2011, the Australian dollar became the fifth most traded currency in the world behind the US dollar, euro, yen and British pound.
Even though “Brexit” — or Britain’s proposed exit from the European Union voted by referendum in June 2016 — greatly affected many currencies around the world, its effect on the Australian dollar was minimal. The AUD/GBP exchange rate went from 0.519547 in June 2016 to 0.572899 in July 2016. With the UK’s exit from the UN scheduled for March 2019, experts predict that the British economy will remain volatile.
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AUD > GBP exchange rate history
We’ve put together the annual average exchange rate for the Australian dollar against the British pound from 2007 to 2016.
|AUD = GBP||0.551105||0.492231||0.547796||0.619212||0.653805||0.644086||0.594875||0.504556||0.458458||0.418793|
History of the Australian Dollar
The Australian dollar was first introduced in 1966, using coins in denominations of 1,2,5,10,20 and 50 cents. In 1984 a one dollar coin was issued, followed by two dollar coin four years later. In 1991 the decision was made to discontinue the use of one and two cent coins, and these were taken out of circulation.
Paper currency was also printed for the first time in 1966, starting with 1, 2, 10 and 20 dollar bills. The following year a 5 dollar was introduced, but the 50 dollar bill did not enter circulation until 1972. Starting in 1988, the Reserve Bank of Australia began issuing polymer banknotes in order to celebrate the bicentenary of the first European settlers to Australia. Today, all Australian bank notes are made using polymer.Back to top
Coins and banknotes of the Australian dollar
Only a few minor changes have been made to the coins and banknotes since they were first introduced to Australia. Although the one and two cent coins have disappeared, there are now one and two dollar coins in circulation as well as a hundred dollar bank note. Each bank note issued depict famous Australians from both the past and present:
- $5 note. Her Majesty Queen Elizabeth II and the national capital
- $10 note. Poets AB “Banjo” Paterson and Dame Mary Gilmore
- $20 note. The reverend John Flynn and Mary Reibey
- $50 note. Inventor David Unaipon and Edith Cowan
- $100 note. Dame Nellie Melba and General Sir John Monash
Australian coins also depict historical and geographical images:
- Five cent coin. The echidna
- Ten cent coin. A male lyrebird dancing
- Twenty cent coin. A platypus, but is being replaced by Donald Bradman
- Fifty cent coin. The Australian coat of arms
- One dollar coin. Five kangaroos
- Two dollar coin. An aboriginal tribal leader set against the Southern Cross and native grass trees
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