The foreign exchange market, commonly referred to as forex, is the largest financial market in the world, with an estimated daily turnover of over $5 trillion. The forex market is a decentralized market where currencies are traded 24 hours a day, five days a week. The forex market is open to individuals, institutions, banks, and governments to trade currencies against each other. In Australia, forex trading is a popular investment option, with traders seeking to profit from the fluctuations in the exchange rates of different currencies.
Australia has a robust forex market that is regulated by the Australian Securities and Investments Commission (ASIC). The Australian forex market is dominated by major global currencies such as the US dollar, Euro, Japanese yen, British pound, and Australian dollar. The Australian dollar is one of the most actively traded currencies in the forex market, accounting for approximately 7% of the daily forex trading volume globally.
The Australian economy is heavily reliant on exports, particularly commodities such as iron ore, coal, and natural gas. Therefore, the value of the Australian dollar is largely influenced by the demand for these commodities in the global market. When the demand for Australian commodities is high, the value of the Australian dollar increases, and when the demand is low, the value of the Australian dollar decreases.
Another factor that influences the value of the Australian dollar is the interest rates set by the Reserve Bank of Australia (RBA). When the RBA raises interest rates, the value of the Australian dollar increases, and when the RBA lowers interest rates, the value of the Australian dollar decreases. This is because higher interest rates attract foreign investors looking for higher returns on their investments, which increases the demand for the Australian dollar.
Apart from the Australian dollar, other major currencies that are actively traded in the Australian forex market include the US dollar, Euro, Japanese yen, and British pound. The US dollar is the most actively traded currency globally, accounting for approximately 88% of the daily forex trading volume. The US dollar is widely used as a reserve currency by central banks globally, and its value is influenced by factors such as the US economy, interest rates, and geopolitical events.
The Euro is the second-most traded currency globally, accounting for approximately 32% of the daily forex trading volume. The Euro is the official currency of 19 European Union countries and is influenced by factors such as the European economy, interest rates, and political events. The Japanese yen is the third-most traded currency globally, accounting for approximately 17% of the daily forex trading volume. The Japanese yen is influenced by factors such as the Japanese economy, interest rates, and geopolitical events.
The British pound is the fourth-most traded currency globally, accounting for approximately 13% of the daily forex trading volume. The value of the British pound is influenced by factors such as the UK economy, interest rates, and Brexit-related events. The Swiss franc is also a major currency that is actively traded in the Australian forex market. The Swiss franc is considered a safe-haven currency and is influenced by factors such as the Swiss economy, interest rates, and geopolitical events.
In conclusion, the forex market in Australia is a vibrant and dynamic market that offers traders the opportunity to profit from the fluctuations in the exchange rates of different currencies. The Australian dollar is the most actively traded currency in the Australian forex market, accounting for approximately 7% of the daily forex trading volume globally. Other major currencies that are actively traded in the Australian forex market include the US dollar, Euro, Japanese yen, British pound, and Swiss franc. Traders in the Australian forex market should keep abreast of the factors that influence the value of these currencies to make informed trading decisions.
