Australian Dollar futures (6A) allow you to trade the value of the Australian dollar against the U.S. dollar in a liquid and transparent market.
The AUD/USD is typically the fifth-most traded currency pair in the foreign exchange (forex) market. Though Australia only ranks 13th in the world in terms of GDP, its status as an important commodity producer and key trading partner with developing Asian economies gives its currency an outsized importance.
Australia has a stable government, fiscal discipline and an approach to business and law that is attractive to investors and not always typical of the APAC countries. When these qualities are paired with its central bank, The Reserve Bank of Australia, with a sparse history of intervention and success at controlling inflation, it is little wonder that Australia’s currency attracts interest from a global marketplace eager to invest in the region.
Each AUD/USD futures contract represents 100,000 Australian dollars with a minimum price fluctuation of $.0001 per Australian dollar. The contract trades Sunday-Friday from 6 p.m. to 5 p.m. Eastern Time (ET) with a daily 60-minute break at 5 p.m. ET.
Trading the Market
Market participants trading the AUD/USD futures contract should watch for the traditional factors that impact exchange rates, such as purchasing power and interest rate parity, along with releases of economic data such as GDP, retail sales, inflation data and general daily news.
Additionally, Australia’s economy is largely driven by metal and agricultural commodities and the value of the Australian dollar generally rises and falls in partner with the commodity indexes.
People taking a stake in 6A monitor reports from Australia’s Bureau of Agricultural and Resource Economics and Sciences for supply developments in mining, weather and harvests.
Due to Australia’s close trading ties with China and other developing countries in the APAC region, stories that reflect growing demand in those countries ultimately cascade into changing valuations in 6A.
These factors make the Australian dollar attractive for investors wishing to go long on commodities and profit from the seemingly insatiable resource demand of Asia’s emerging economies.
Peter Knight Advisor