The Australian dollar (sign: $; code: AUD) is the currency of Australia (including its external territories Christmas Island, Cocos (Keeling) Islands, and Norfolk Island), and of three independent Pacific Island states, specifically Kiribati, Nauru, and Tuvalu. It was introduced on 14 February 1966 when the pre-decimal Australian pound, with subunits of shillings and pence, was replaced by the new decimal currency, the Australian dollar.
Within Australia, it is almost always abbreviated with the dollar sign ($), with A$ or AU$ sometimes used to distinguish it from other dollar-denominated currencies. It is subdivided into 100 cents.
In 2016, the Australian dollar was the fifth most traded currency in world foreign exchange markets, accounting for 6.9% of the world's daily share (down from 8.6% in 2013) behind the United States dollar, the European Union's euro, the Japanese yen and the United Kingdom's pound sterling. The Australian dollar is popular with currency traders, because of the comparatively high interest rates in Australia, the relative freedom of the foreign exchange market from government intervention, the general stability of Australia's economy and political system, and the prevailing view that the Australian dollar offers diversification benefits in a portfolio containing the major world currencies, especially because of its greater exposure to Asian economies and the commodities cycle.
The Australian dollar was legal tender of Papua New Guinea until 1 January 1976, when the Papua New Guinean kina became the sole legal tender there.
The previous currency, the Australian pound, was introduced in 1910, and had been officially distinct in value from the U.K.'s pound sterling since devaluation in 1931. The pound was divided into 20 shillings and each shilling was divided into 12 pence, making a pound worth 240 pence.
With pounds, shillings and pence to be replaced by decimal currency on 14 February 1966, many names for the new currency were suggested. In 1963, the then-Prime Minister of Australia, Robert Menzies, a monarchist, wished to name the currency the royal. Other proposed names from a public naming competition included more exotic suggestions such as the austral, the oz, the boomer, the roo, the kanga, the emu, the koala, the digger, the zac, the kwid, the dinkum, and the ming (Menzies' nickname). Menzies' influence resulted in the selection of the royal, and trial designs were prepared and printed by the Reserve Bank of Australia. Australian treasurer and future Prime Minister, Harold Holt, announced the decision in Parliament on 5 June 1963. The royal would be subdivided into 100 cents, but the existing names shilling, florin and crown would be retained for the 10-cent, 20-cent and 50-cent coins respectively. The name royal for the currency proved very unpopular, with Holt and his wife even receiving death threats. On 24 July Holt told the Cabinet the decision had been a "terrible mistake" and it would need to be revisited. On 18 September Holt advised Parliament that the name was to be the dollar, of 100 cents.
The pound was replaced by the dollar on 14 February 1966 with the rate of conversion as two dollars per Australian pound, or one dollar for ten Australian shillings.
Since Australia was still part of the fixed-exchange sterling area, the exchange rate was fixed to the pound sterling at a rate of $1 = 8 U.K. shillings ($2.50 = UK £1).
In 1967, Australia effectively left the sterling area, when the pound sterling was devalued against the US dollar and the Australian dollar did not follow. It maintained its peg to the US dollar at the rate of A$1 = US$1.12.
On 27 September 2012, the Reserve Bank of Australia stated that it had ordered work on a project to upgrade the current banknotes. The upgraded banknotes would incorporate a number of new future proof security features and include Braille dots for ease of use of the visually impaired. The first new banknotes (of the five dollar denomination) were issued from 1 September 2016, with the remaining denominations to be issued in the coming years.