The Australian Dollar is the official currency of the Commonwealth of Australia and the independent islands of Kiribati, Nauru and Tuvalu. The Australian dollar holds a prominent position on the world market as the fifth most-traded currency. The only currencies traded more are the U.S. dollar, the euro, the Japanese yen and the British pound sterling. Currency traders note that trading in Australian dollars has several benefits, including high interest rates, a foreign exchange market watched over but not intruded upon by the government, a stable economy and a stable political system. The Australian dollar is very influential in the Asia-Pacific region of the world.
Australia once used a currency system of pounds, shillings and pence based on the system of the United Kingdom, but this was replaced by a new decimal currency in 1966. The name of the new currency was strongly debated and before it officially became known as the dollar, it was briefly called the Australian royal. At its introduction, the Australian dollar was pegged to the pound sterling at a rate of 2.50 AUD: 1 GBP. The following year, the pound sterling was devalued against the U.S. dollar and instead of following the devaluation of the pound sterling, it maintained a peg to the U.S. dollar at 1 AUD: 1.12 USD. The peg to the U.S. dollar remained until 1983 when the Australian dollar was floated on the market. The Australian dollar is considered a strong world currency, and it hit an all-time high in 2011.
The first coins issued under the new currency system were in denominations of 1, 2, 5, 10, 20 and 50 cents. Today, Australian coins are in denominations of 5 cents, 10 cents, 20 cents, 50 cents, $1 and $2. The one-cent and two-cent coins were discontinued in 1991. The first series of banknotes were in denominations of $1, $2, $10 and $20. In 1988, Australia converted to polymer banknotes in honour of the bicentennial of European settlement of the continent. Banknotes are now in denomination-specific colours: pink for $5, blue for $10, red for $20, yellow for $50 and green for $100.