Skip to content
GetProfitable
Search
Dictionary

Aussie

The Australian dollar, and by extension the pair AUD/USD; treated by traders as a proxy for Chinese demand and global risk appetite.

Australia exports iron ore, coal and gas, largely to Asia, so the currency tends to rise when global industry is expanding and fall when it is not. That makes AUD/USD a rough sentiment barometer, often moving with equity indices rather than against them.

The Australian dollar has historically carried a higher policy rate than the yen or franc, which made it a favourite long leg in a carry-trade. When carry unwinds, AUD/JPY tends to fall hardest.

Example: a risk-off session sees the S&P 500 down 2%, AUD/USD down 0.9% from 0.6620 to 0.6560, and AUD/JPY down 1.8%. The cross falls further than either dollar pair because both legs move against the position.

Related: kiwi, carry-unwind, yen-cross

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Contango and backwardationTwo futures curves against contract expiry: one rising above spot, one falling below it.The same commodity, priced for delivery at different dates.78.0076.0074.0072.0070.00Futures pricespot+1m+2m+3m+4m+5m+6mMonths until the contract expiresspot price74.00CONTANGOlater contracts cost more than spotBACKWARDATIONlater contracts cost less than spot
Contango and backwardation. A futures curve shows what buyers will pay for delivery in one month, two months and so on. When later contracts cost more than the spot price the curve is in contango; when they cost less it is in backwardation.

Educational only, not advice. Spotted an error? Post in Site Feedback.