With the australian dollar being one of the major global currencies, there are many ways for investors to gain exposure to the aussie dollar. Investing in the currency directly, investing in australian stocks and bonds, investing in currency ETFs, and trading currency derivatives are some of the main methods to invest in the australian dollar. Proper analysis of the australian economy and monetary policy as well as managing currency risks are key to successfully investing in the aussie dollar.
investing directly in the australian currency
The most direct way to invest in the australian dollar is to simply buy and hold the currency itself. This can be done by opening a forex trading account that allows trading of the major currency pairs like AUD/USD. Investors can go long on the aussie by buying AUD/USD. The exchange rate gains if AUD appreciates against USD will lead to profits. However, the risk of loss also exists if AUD depreciates. Direct currency investment provides full exposure but investors need to actively manage risks.
investing in australian stocks and bonds
Investing in stocks and bonds of australian companies is an indirect way of gaining exposure to the aussie dollar. As the financial performance of australian companies is tied to the domestic economy and the aussie dollar, their stock and bond prices fluctuate with the currency. Investors can buy stocks and bonds of strong australian companies or ETFs tracking australian equity and bond indexes. The currency exposure is indirect but investing in quality australian assets can give healthy portfolio returns.
investing through currency ETFs
Several ETFs provide exposure specifically to the australian dollar against other major currencies. The Invesco CurrencyShares Australian Dollar Trust (FXA) tracks the aussie versus the USD. The WisdomTree Bloomberg Australian Dollar Strategy Fund (AYA) has exposure to the australian dollar against a basket of other currencies. Currency ETFs provide a low cost and diversified way to invest in the aussie dollar.
trading currency futures and options
For sophisticated investors, actively trading currency futures and options allows leveraged and hedged exposure to the australian dollar. Futures and options contracts on AUD/USD and other aussie crosses are available to trade on the CME and other global derivatives exchanges. Using currency derivatives enables leveraging investment exposure but also requires strong risk management.
The australian dollar provides a way to diversify currency exposure in investment portfolios. Direct currency investment, australian stocks and bonds, currency ETFs, and currency derivatives are some of the main methods for investors to gain exposure to the aussie dollar. Proper analysis of economic fundamentals, interest rate differentials, and currency risks is key for successful investing.