The AUD/USD spot price represents the amount in US dollars that can be purchased with one Australian dollar.
As one of the seven most traded pairs in the world, AUD/USD is known as a major currency pair. It is also frequently referred to as a commodity pair because its price is heavily influenced by the value of related commodities.
In general terms, the Australian dollar gains value whenever gold prices appreciate.
This reflects the country's status the third biggest producer of gold in the world. Its currency had an 84 per cent positive correlation with the precious metal between 1999 and 2008.
The price of other commodities such as copper, nickel and oil, as well as key economic indicators such as unemployment data and GDP statistics, also has an impact on the value of the Australian dollar.
In July this year, the Aussie climbed to a record high against the American currency after an official report revealed the country's consumer price inflation had risen more than expected during the second quarter.
The inflation data raised the prospect of the Reserve Bank of Australia (RBA) hiking interest rates.
However, at a meeting on August 2nd the central bank opted to leave the cash rate unchanged at 4.75 per cent, where it has been since November 2010.
As with other currency pairs, the AUD/USD price is strongly influenced by the interest rate differential by the two relevant central banks (the RBA and the US Federal Reserve in this case).
AUD/USD Market Influences
The trade flow between a set of countries illustrates the demand for goods and services that also indicates demand for a country's currency to conduct trade. Any currency loses value if there is a high level of inflation in the country. The gross domestic product (GDP), employment levels, retail sales, capacity utilization etc. denotes the level of a country's economic growth and health.