Australia’s economy is a service based economy with more than 68% of GDP being derived from the service sector. Despite the fact that agriculture and mining makes up only 4.7% of Australian GDP, they account for over 65% of the country’s exports. Due to this the Australian Dollar is extremely sensitive to any movements in commodity prices, in particular gold because Australia is the world’s 3rd biggest gold exporter.
Australia has developed a very close trade relationship with Asia, particularly China and Japan, which are its two largest export markets. This means that the Australian Dollar is linked very closely with, and has a unique exposure to Asia, which is not normally the case for other non-Asian currencies.
The Australian economy was able to weather the Asian financial crisis reasonably well, so while there is exposure there, it is also important to be aware of the country’s historically strong domestic consumption in times of global economic slowdowns.
The last major factor to remember about the Australian Dollar, is that Australia has one of the highest interest rates in the developed world which has led to the currency being one of the primary beneficiaries of carry trade flows.