Why is the Australian Dollar known as the risk on currency?

[essexpoker]

Hi Guys,

I am new to the forum so a hello to everyone!

Just a quick question - why is the AUD known for heightened risk appetite in the market? Why is it said that when the AUD strengthens traders appetite for risk is increasing?

Does it have any link to carry trades or the economies link with commodities?

Thank you in advance for your responses!

[FringFX]

investors search for high yielding currencies.
aud is one such currency as it offers a better interest rate than other major countries

when people are in a good mood or are confident of future prospects, they are open to investing and taking risks (increased risk appetite). in this condition, they go invest/put their money in currencies (like AUD), stocks, commodities, and others.

yes, it is also tied up with economies and commodities.
Australia is 1 of the stronger and more stable economies right now, buoyed by the demand for commodities which Australia is rich in.
buying a currency such as AUD is a vote of confidence in that currency's country/economy.

when you study and trade currencies, you are basically trading a highly interrelated market so it pays to learn about these various intertwined aspects. you have an enquiring mind and that is truly awesome