From pound to dollar

The year is 1966 and the Australian paper currency is shifting from pound to dollar.

Robert Menzies is the Australian Prime Minister in 1966. Before his office, the Commonwealth of Australia, traded an Australian Pound. This pound was pegged to the Sterling pound UK and reflected the common ties between the British nation and the Australian Commonwealth until 1946 when the Aussies opted to peg the Australian pound to the US dollar. In 1944 the Bretton Woods Agreement had renegotiated the terms of a gold standard and the US dollar was the currency of choice for reserve banks internationally.

One pound did not have decimals until 1966. With the move from pound to dollar the Aussie currency now followed a decimalized system where one dollar was 100 cents and initially cash transactions were carried out to the nearest penny. This changed in recent years where the nearest nickle is considered standard.

Bretton Woods fell apart in 1971 and the Australian Dollar began to trade on par with the US dollar. In 1974 the Australian financial administration opted for a basket of currencies to peg the AUD to.

AUD is the ISO or currency code of the Australian dollar.

The basket had the intention of acting as a trade weight index and the move towards this system of accounting was in part supposed to reduce the volatile fluctuation experienced by being solely pegged to the US currency.

In 1983 the AUD was released from the peg system and the TWI and allowed to float freely. This meant that the currency of the Australians was being valued by free markets and the sentiment of currency traders.

It has remained a floating currency and one of the major currencies of the world and at this time is amongst the top ten highest traded currencies on the foreign exchange. The Australian dollar is considered a commodity currency since it shifts in price with the movement of metals, mostly gold which is a rich resource in the Commonwealth of Australia.

However such is not always the case as the current market turbulence ( May 2010 ) indicates.

The conditions in Europe are seeing lots of forex money move towards the US dollar. The price of gold is hitting new highs at 1250 US dollars yet the AUDUSD pair is moving in favor of the USD. This is a slight anomoly.

The move from pound to dollar was made in 1966. Several names were courted for the new paper fiat of Australia. Amongst the suggestions were Austral, Kaola, or Royal.

However the Australian went for dollar. The AUD is nicknamed the Aussie or sometimes the Pacific Peso and provides about 5 percent of the liquidity on the foreign exchange interbank system.

A chart of the Australian dollar trading the USD to 2010.

Volatility is tradeable but not for the greedy or those who do not understand the power of using (h)edging instruments.