How to trade Australian Dollar ETF

The Australian dollar or the AUD primarily is a commodity currency as majority of the GDP generated by the Australian economy comes from commodity exports. Australian dollar is the sixth largest traded currency in the forex world. For long, the Australian dollar has been traded by individuals and corporations who have business interests in the Australasian region. What makes the currency attractive for investors and traders is the fact that the Australian economy is quiet stable and the political situation has seldom been volatile.

Trading Australian Dollar ETF

The apex bank of Australia, the Reserve Bank of Australia minimally intervenes in the currency market making it even more attractive for international investors. However, like other currencies, the Australian dollar too is vulnerable to the following circumstances –

  • Prone to Commodity Price Fluctuations – Fluctuations in commodity prices affect the Australian dollar very fast. Simply put, if Australian commodities are in demand elsewhere (in particular copper and gold), the currency will trade strong against the USD. The vice versa also holds true.
  • Draughts and Natural Calamities – Draughts have largely affected the agricultural commodity production and export in the past. Any such recurrences might have an adverse impact on the forex rate of the Australian dollar.

Australian Dollar ETFs: Easier than Futures to Trade

As the world is turning towards gold as a safe haven, Australia, which is third largest producer gold, will not witness a weak currency at least in 2011. Australia and its neighbor New Zealand may merge by 2015 creating a single economy. However, that is eons away as far as forex traders are concerned. Holding futures in the Australian dollar would not be prudent enough, but if you wish to have exposure to the forex market (for hedging) in the form of Australian dollars, the Australian dollar ETF is highly recommended. Trading FXA through an online broker is highly advisable as the cost savings in the form of fees are considerable. FXA is the top performing Australian dollar ETF in the market.

No matter how safe the investment seems, always monitor your investments periodically and make necessary adjustments when the conditions warrant it.