AUD to USD buy and sell rate can be defined as the rate at which a forex trader sells an Australian dollar in exchange for the United States dollar and the rate at which a forex trader buys the Australian dollar back using the United states dollar. The AUD to USD buy and sell rate can also be defined as the price of a country’s currency (United States dollar) in terms of another country’s currency (Australian dollar). This only means that buy and sell rates are dependent of two component which are the domestic currency and the foreign currency.
The AUD to USD buy and sell rate are indicators of the best price at which a currency can be bought or sold at a specific point in time in the forex market. The buy rate is said to be the maximum price at which a forex trader can pay for a particular currency while the sell rate is said to be the minimum price at which a forex trader is willing to receive for the same currency.
UNDERSTANDING THE BUY AND SELL RATE OF AUD TO USD
In forex trading, forex traders see money as a commodity. When a forex trader buys a currency pair (USD), he hopes that the value of the USD will strengthen when equated to the currency being sold (Australian dollar). If a forex trader is seen on the selling side, he is betting that the currency being sold (Australian dollar) will weaken when evaluated to the currency being bought (United States dollar).
Just like every other commodity found in the forex market, currencies are exhibited in quotes based on the spot rates of the currency and traded in pairs just as the AUD/USD. Although the AUD to USD buy and sell rate involves the buying and selling of the Australian dollar and the United states dollar, a forex trader is not physically buying or selling anything and this means that no physical exchange of money ever occurs. This is the same principal that applies to the buy and sell of public traded company shares where all form of transaction is done electronically inside a trading account. But in the case of the forex market, there is no form of central exchange but it’s replaced with an interbank market which connects all forex market trades in a network of banks and institutions.
In conclusion, the AUD to USD buy and sell rate is always made up of a base currency (USD) and the counter currency (AUD). In a direct quotation, the foreign currency is seen to be the base currency while the domestic currency is known as the counter currency. In an indirect quotation, the domestic currency is seen as the base currency while the foreign currency is known to be the counter currency.
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