Australia has a robust trading culture, and a well-recognised regulatory climate. The currency markets are very popular and it’s reported that the daily volume at Australia’s top currency brokers is larger than the cash volume of the Australian stocks.

There are three trading time zones, the Asia-Pacific, Europe and USA. Australia lies in the Asia-Pacific zone, the first to begin the forex and commodity trading day. Trading volume is relatively thin until Japanese traders join the fray a couple of hours later. Europe is the largest trading volume within the foreign exchange market.

Australia is a natural resources juggernaut, rich in oil and coal, base and precious metals, along with grains. The physical trading of these products in the global market arena has led to a robust derivate market which is actively traded by retail and institutional investors. Many exploration and production companies are publically traded, making the Australian equities liquid places to generate risk.

Additionally, many commodity products are priced in dollars, Euros and Yen. This natural base promotes a liquid currency trading environment. The physical nature of an active Australian export market has buoyed both the spot and forward currency market.
Furthermore, China is one of Australia’s largest trading partners. The world’s second largest economy imports huge quantities of natural resources into its borders. China’s influence as a consumer provides a natural trading partner for investors in the currency market. Demand for resources will likely provide an underlying base for the currency.

Despite having a robust framework, the country is not immune to the free market nature of its capital markets. Currency brokers in Australia have facilitated access to their trading platforms, making currency trading a relatively common endeavor. The industry is regulated but access to leverage became a point of contention after many retail investors suffered enormous loses when the Swiss National Bank announced in January 2015 that it would no longer support its currency peg against the Euro. The value of the Swiss Franc soared on the news, gapping 30% initially.

Now a 30% loss is large, but if you combine it with leverage that number can be catastrophic. Leverage allows investors to borrow capital at very low rates and use it to purchase a financial asset such as a currency pair. In some places in Australia leverage was as high as 500 to 1. That means if you have $1,000 dollars in your account, you could place a trade with a value of $500,000. Well a 30% loss on $500,000 is a whopping, $150,000 dollars. If you only had $1,000 in your account, either you or your broker would be on the hook for the additional $149,000.

Australia has an active alternative investment community investing in a wide range of hedge fund and private equity strategies. The property industry is also strong, with a strong bias toward the major cities on the coasts. Currency trading is still active and is attempting to recover from January’s large retail currency loses.