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I am working with the AUD/USD forex pair for my master's thesis (not in finance, hence I'm asking such a simple question). I am wondering if it's proper usage of the word 'financial asset' to refer to the AUD/USD forex pair.

For example:

The financial asset used in this thesis is the AUD/USD foreign exchange price, between the years of 1990 and 2000.

Wikipedia's 'financial asset' page lists currency as one of the things it can mean, however I'm unsure if that applies to forex prices like in this context.

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You have 2 contracts AUD/USD and USD/AUD, one is to buy AUD with USD, the other is buying USD with AUD.

The currency itself is an asset, however the use of the word pair could be misleading since you do not buy the pair. So, the word financial asset could be used in reference to buying AUD with USD in the same way as buying APPL with USD.

Maybe this sounds better...

The financial asset used in this thesis is the AUD/USD foreign exchange contract

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  • $\begingroup$ I see, so Australian dollars themselves are the 'financial asset', which happens to be priced in USD? Is that correct? Edit: Also I appreciate the example sentence. $\endgroup$ – Patty Jul 13 '17 at 2:15
  • $\begingroup$ The following would also be acceptable: The financial asset used in this thesis is the AUD/USD foreign exchange rate $\endgroup$ – JejeBelfort Jul 13 '17 at 8:58
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Financial asset is the Aussie dollar bill or coin. If your numeraire happens to be the US dollar, then the FX rate is the market value of the financial asset denominated in units of the numeraire.

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A currency can never be an asset! If it were, its value ought to appreciate with the risk free rate of return in a risk-neutral world. It does not, as it is obviously the case for the domestic currency of which the value stays constant.

Many people confuse the currency with the Bank Account, which is indeed an asset. They are not the same though. And clearly a currency coin or note is not a Bank Account and thus not an asset.

A contract that stipulates the receipt of a currency unit in some specific future time is indeed an asset. The quotation AUD/USD = 0.79 refers to a swap type of contract between two parties A and B that stipulates that A will receive from B at some future time (today + settlement period) one unit of AUD and give B 0.79 units of USD. Neither the one unit of AUD not the 0.79 units of USD exchanged at settlement date constitute assets. The contract does!

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