Currency trading, or ‘forex’ trading, is becoming increasingly popular in Australia. One reason for this is that advances in financial technology are making it far easier for retail traders to access the world’s currency markets.
Here, we are going to look at some of the most popular currency pairs for Australian forex traders. We also answer some common questions in relation to currency trading in Australia.
The most popular currency pairs for Australia forex traders
Australian forex traders trade a wide range of currency pairs. However, some of the most popular pairs are:
This is the pairing of the Australian dollar and the US dollar. Popular due to its high level of volume and volatility, this currency pair can be impacted by a range of factors including economic data releases in Australia and the US, interest rate differentials, commodity prices, and political factors.
This is the pairing of the Australian dollar and the Japanese yen. This pairing is popular since it tends to mirror investor sentiment. Because the Japanese yen is seen as a ‘safe-haven’ currency, the currency tends to strengthen when investors are in ‘risk-off’ mode and weaken during ‘risk-on’ periods.
This is the pairing of the Australian dollar and the New Zealand dollar. This pairing is popular due to the fact that moves tend to be closely related to the two countries’ economies rather than global economic factors. Commodity prices can have a big impact on this pairing as both countries are exporters of commodities.
This is the pairing of the US dollar and the Japanese yen. Known as the ‘Ninja’ or the ‘Gopher’, it’s popular because it’s one of the most liquid currency pairs globally. Since Japan is one of the largest importers of crude oil, this pairing has a strong correlation to crude oil prices.
Is trading forex from Australia harder because of the time change?
The forex market is open 24 hours a day, five days a week. However, time zones can impact the opportunities for Australian traders. At some times of the day, liquidity can be thin and trading spreads can be high. Therefore, certain times of the day are better suited to trading than others.
When is the best time of day to trade?
The forex market is divided into four trading sessions – Sydney, Tokyo, London, New York. The best time of day for Australian traders to trade is generally when there is more than one market open. During these periods, there is often a significant increase in liquidity and more trading opportunities.
Can you invest in currencies rather than trade them?
There are ways to invest in currencies if you would prefer not to trade them. One way to invest is through a currency-based exchange-traded fund (ETF). An example here is the BetaShares U.S. Dollar ETF. This aims to track the performance of the US dollar against the Australian dollar. So, for instance, if the US dollar rises 10% against the Australian dollar, the value of the fund should go up 10% too (before fees and expenses).
How can you trade forex?
The easiest way to trade forex is via an online account with an FX broker such as IG, CMC Markets, Pepperstone, or AvaTrade. These brokers allow you to trade currencies via Contracts for Difference (CFDs). CFDs are financial instruments that enable you to profit from the price movements of a security without owning the underlying security itself.
Who regulates forex trading in Australia?
In Australia, FX trading is regulated by the Australian Security and Investment Commission (ASIC). Forex brokers are required to hold a valid Australian Financial Services License (AFSL) to be able to operate in Australia.