What Is The History of the Australian Dollar Exchange Rate?

Peter Lavelle - 2.07.2012. In this post I want to address the question: What is the history of the Australian dollar exchange rate?

This might be useful if you're planning to move to Australia, but want to know how the current exchange rate compares to the recent past, and stretching even farther back.

Since 2008, the history of the Australian dollar is one of rapid rises against virtually every other currency, up until the last three months.

For instance, if we look back at August 2007, before the financial crash, one Australian dollar would have got you 0.41 UK pence.

Equally, with the euro, one Australian dollar would have got just 0.60 cents. Today, that's 0.64 pence, and 0.80 cents to the Australian dollar respectively.

In other words, in the past half decade the AUD has gained 56.0% against the UK pound, and 33.0% against the euro. How come?

The simple answer is that, while the financial crash plunged the UK and Europe into a recession from which they still haven't emerged, Australia dodged the bullet.

It didn't enter recession, and continues to expand at a healthy pace compared to most (if not all) of the industrialised world.

That's because, as is widely known throughout Australia if not elsewhere, Australia has been benefiting from a once-in-a-century mining boom since 2007, backed by Chinese demand for its commodities and raw materials.

That investment is expected to add some $300 billion to the Australian economy in 2012/3, which is why it's easy to see why the AUD has gained.

If the UK, Europe, and to a lesser extent the US, are spinning their wheels, the Australian star is looking brighter each day.

Of course, though a year or two years ago, it might have looked like the AUD was unstoppable because of all this, in the last three months or so its rise has slowed.

In fact, compared to March 2012, the Australian dollar is in fact half a cent down against the UK pound today, having fallen three cents about six weeks ago.

This is for two reasons:

  1. Perhaps most important, Australia remains a small economy compared to the UK and Europe, in spite of its bright prospects. The combined population of the UK and Europe is some 350 million people of instance, against Australia's 20 million. That provides in-built limits to what the AUD can do.
  2. In addition, the driving force of Australian growth, Chinese investment, is also on the wane to some extent. China depends on Europe for its imports, in short, and as the continent slows, that too affects just how much Australian coal and iron the Chinese need.

So in other words, though Australia and Europe have little direct bearing on each other, globalisation gets in the way. Looking forward, that will affect just how much further the AUD has to climb.

Yours kindly,

Peter

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