Equilon FXKeep these questions in view.
- Domestic demand or external-price channel?
- Australia-specific move or dollar-wide move?
- Conversion arithmetic or realised business outcome?
Use Full reading for the reasoning, worked example and original references.
A domestic and an external lens
The Australian outlook can involve consumption, employment, inflation, export prices and investment flows. Each is a distinct channel. The RBA’s educational material is a useful starting point for understanding why a commodity headline is relevant without making it the only possible explanation of an AUD move.
Bring the US side back in
AUD/USD can move because the Australian outlook changes, because the US outlook changes, or because both do. A complete relative narrative asks what was new in each. Otherwise, a broad dollar move can be incorrectly attributed entirely to Australian news.
Distinguish the business effect
An exchange-rate move changes relative prices for importers, exporters and consumers. Contracts, pricing decisions and timing affect how much passes through. Conversion arithmetic is immediate; the change in a business’s realised revenue or a consumer’s final price need not be.
Conversion before pass-through
At the hypothetical rate shown, A$100 is priced at US$70. If the quote falls to 0.6500, it is priced at US$65. A fixed US-dollar invoice costs more Australian dollars, but the final price paid by a customer may adjust differently because of margins, contracts and other costs.
What kind of statement is this?
AUD / USD / USD per AUD
Follow domestic policy and external-price channels as separate parts of the comparison.
This material does not establish a future policy decision, a live exchange rate or the direction of the next market move. Those questions require dated evidence and a specific comparison.
At an illustrative AUD/USD quote of 0.7, what does one AUD buy before costs?
Keep the language clear Three useful definitions
Base currency — The first currency in a pair. In EUR/USD, the rate expresses the price of one euro in dollars. Read more ↗
Quote currency — The second currency in a pair, used to express the price of the base currency. USD is the quote currency in EUR/USD. Read more ↗
Pip — A conventional small increment used to discuss an FX quote. Its size depends on the quotation convention; the market-depth example uses 0.0001 USD per EUR. Read more ↗
Original references.
Institutional descriptions were prepared against these references for this edition. Follow the source for current decisions, releases and methodology. Numerical examples on this page are illustrative.