Currency Trading in Australia
In 1983, the Australian dollar was unpegged from the U.S. dollar and floated on the open currency market. As a commodity-based hard currency, investors can freely trade the Australian dollar through various foreign exchange platforms, collectively known as forex.
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Opening An Account
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Most Australian banks and stock brokers allow customers to operate forex accounts in either Australian dollars or other hard currencies such as the U.S dollar, Euro, Japanese Yen or British Pound Sterling. The process allows the simultaneous purchasing and selling of currency pairs. Transactions equivalent to more than $10,000 Australian dollars must be reported to regulatory authorities.
Types Of Trading
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Forex in Australia has gained the level of sophistication of stock trading. Investors can trade a basket of hard currencies via an Exchange Traded Fund, place long and short term orders, and contracts for difference, and add stop loss and buy limit orders to minimize risks and maximize returns.
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Pitfalls
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Forex trading is much like trading high-risk, exotic financial instruments such as derivatives, credit default swaps and warrants. It can become highly speculative, based on market sentiment rather than economic fundamentals. The Australian dollar is currently trading high against the U.S. dollar due to Australia's strong economy, as of 2010, but has been the target of speculative currency attacks in the past.
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References
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