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During the 1990s, the value of the Australian dollar ($A), as measured against other currencies in the trade-weighted index, was quite volatile. The index fell from a high of 61.6 in September 1990 to 47.8 in September 1993, before recovering over the latter part of the decade to reach 58.3 at June 1999. Since then, it fell again, to 52.9 in June 2000, increasing slightly to 53.4 by June 2002.
The Australian dollar exchange rate is often quoted in terms of its exchange with the United States dollar ($US).
However, to get a more comprehensive indication of Australia’s exchange rate, a trade-weighted index (TWI) is used. The TWI, which is calculated by the Reserve Bank of Australia (RBA), measures changes in the Australian currency relative to the currencies of our main trading partners. The relative importance of trade occurring between each country and Australia is taken into account. Over time, international trade patterns tend to alter, making it necessary to modify the weights to reflect the new trade patterns. The trade-weighted index is reweighted annually (on 1 October) and on special occasions as required.
The TWI includes the currencies of 20 countries which account for at least 90% of Australia’s trade. Calculation of the TWI is based on the exchange rates for the $A against the chosen currencies at 4 p.m. for each trading day.
The TWI is an absolute number and does not express the price of any single currency.