Best Time to Exchange AUD to USD: AUD/USD Trade Guide

Since 2020, the United States has been aggressively trying to curb inflation by significantly increasing interest rates. As a result, the US dollar has strengthened against many currencies, including the Australian Dollar (AUD). Based on historical trends, now is not the best time to exchange AUD for USD.

However, experts believe that the US economy will stabilize soon, allowing the central bank to lower rates, which would weaken the US dollar. This potential change is a key factor influencing the AUD to USD exchange rate. The best time to exchange AUD to USD may still be ahead.

If you're an Australian who wants to hold USD as a safe currency or is planning a trip to the US, you'll want to convert your AUD to USD when AUD is strongest. Online solutions like Wise make this easy by offering the mid-market exchange rate and providing auto-conversion tools.

In this article, we'll explore the factors influencing the AUD and USD exchange rate forecasts and introduce Wise, which offers transparent and cost-effective currency conversions. By the end, you'll understand when to exchange Australian dollars for US dollars and how to get the best deal possible.

When Is the Best Time to Exchange AUD to USD?

The key is to buy when the Australian dollar is stronger than the US dollar, meaning 1 AUD will get you more USD. Let's look at the 10-year historical trends to see at what rate the Australian Dollar is relatively stronger than the US Dollar:

• Highest Rate: The AUD was at its strongest against the USD in May 2021, with 1 AUD at approximately 0.9491 USD.
• Lowest Rate: March 2020 saw a major dip as the USD became a safe-haven currency during the beginning of the Covid-19 pandemic, with 1 AUD at around 0.574 USD.
• Average Rate Over 10 Years: In the past 10 years, 1 AUD has averaged to equal about 0.764 USD.

Best Time of Day to Exchange AUD to USD

You can trade forex pairs with brokers, and convert AUD to USD on multi-currency accounts 24 hours a day. However, the best times to trade AUD and USD are usually between 05:00 and 14:30 AEST. During these hours, there tends to be more trading activity and lower markups.

Factors That Influence AUD-USD Exchange Rate Forecasts

Understanding what influences exchange rates between two currencies is a challenge because many factors play into it. However, one clear indicator to watch is interest rates:

Central Bank Interest Rates

Interest rates play a vital role in influencing exchange rates as they directly affect inflation. By definition, inflation is the weakening of a currency's purchasing power over time. Here's how central banks use interest rates to manage inflation and control the strength of their currency:

Central banks set interest rates on government debt, which has a rippling effect on consumer spending habits. When interest rates are high, the cost of borrowing money becomes more expensive. This discourages people from taking out loans or lines of credit. This reduced demand for credit leads to lower spending and decreased demand for goods and services. Consequently, businesses have less incentive to raise prices, which ultimately helps to keep inflation in check and support the value of the currency.

Conversely, lower interest rates make borrowing cheaper, encouraging spending and increasing demand for goods and services. This heightened demand can lead to price increases by businesses, fueling inflation and potentially weakening the currency over time.

Trends and Policies to Look For

When assessing the impact of central bank interest rates on exchange rates, look at the broader policy direction the central bank is trying to achieve over time. It is simply not enough to compare American and Australian interest rates today.

It's also important to ask, are they raising rates to cool off an overheated economy and rein in inflation? Or are they lowering rates to stimulate a stagnant economy and spur growth? Understanding the central bank's policy objectives and the direction of interest rate changes over time can help to forecast the potential future strength or weakness of a currency.

Other Important Factors to Consider

• Economic Performance: A strong economy with low inflation, positive trade balances, and robust growth typically results in a stronger currency. A thriving economy boosts confidence in the currency and attracts investment, driving up its value.
• Political Stability: Political unrest can negatively affect a currency's value, as investors shy away from countries with high political risk due to uncertainty and potential economic disruptions.
• Inflation Rates: We mentioned earlier that central banks set interest rates to curb inflation. However, their interest rate policy is not always effective. Factors like employment rate and consumer habits can affect inflation rates and make inflation harder to control.
• Recession: When a country is in a recession, the central bank will often lower interest rates to try to spur economic growth (when rates are lower, the cost of borrowing lowers and encourages consumer spending). As we mentioned earlier, low interest rates generally weaken the currency.
• Trade Relations: When a country’s export prices go up compared to its import prices, its currency usually gets stronger. For example, if Australia’s export prices increase, it is able to buy more from the US without needing to sell more to the US.
• Government Debt: If your government is burdened by high debt, then its central bank may lower interest rates to reduce its own rate of borrowing. As we mentioned earlier, this often leads to inflation. However, if your country is not able to control the interest rate of the currency it uses (such as Ecuador, which uses the US dollar), then foreign investment may be a more important influence. High debt can make foreign investors nervous, reducing demand for the currency and thus weakening it.

Is It a Good Time To Buy US Dollars With Australian Dollars Now?

In mid-2024, the US Federal Reserve's policy continued to focus on curbing rampant inflation caused by post-Covid government spending. Analysts at major banks generally believe that 2024 will see some inflation reduction, allowing the Fed to slowly lower interest rates.

Although the rate decreases have been less frequent than experts anticipated, the consensus is that the Fed will likely reduce them by the end of the year. This would result in a slight weakening of the US dollar against other currencies.

Given this forecast, it could possibly be beneficial to wait for USD to weaken against AUD. However, it's important to note that these expert forecasts are rough estimates and are not always accurate. Nonetheless, this provides an example of how banks and investors tend to factor interest rate policy into their decisions.

You can look at the recent announcements about interest rate changes by the two countries' central banks. These are on the public record. This information can help you decide whether the Australian dollar is sufficiently strong enough for you or if it's worth waiting for it to get stronger.

Monitor the AUD-USD Exchange Rate

A more straightforward strategy is to keep an eye on the AUD-USD exchange rate, and track how it is doing in comparison to the historic trend. You can easily find exchange rate data on Google or XE.com, which show the mid-market rate.

These platforms allow you to adjust the view by 1, 3, or 6 months, 1 year, 5 years, or even the maximum available timeframe. This way, you get a clear picture of how the AUD has performed against the USD over time, and how strong it is relative to the recent past.

Set Up Target Rate Alerts

If you’re aiming for a specific rate, consider setting up target rate alerts. Services like Wise offer these alerts in their app. You can specify the rate you’re hoping to achieve, and Wise will notify you if and when the rate hits your target. This way, you can convert your funds or make your payment at the optimal time.

At Monito, you can sign up for email alerts too. Our rate alerts will notify you when exchange rates significantly change and tell you which provider offers the best deal at that moment. Sign up after using our comparison engine.

Where to Exchange AUD to USD: Australia or the USA?

Regardless of the banks and traditional money changer services that you find in Australia or the US, you'll never get decent exchange rates and fees. Kiosks at airports are the worst places to exchange money.

If you are a tourist with AUD traveling to the USA, it is cheaper to simply use a debit card without foreign transaction fees to take out cash at an ATM in the US. The best case is to get a card that waives the ATM fee. Even if you can't avoid the ATM fee, it's worth it because the exchange rate you get from Mastercard and Visa will almost always be better than the ones you get at a high street bank in Australia or the US.

The best option is to use a multi-currency account and debit card that gives you the mid-market rate (like Wise). In this case, the exchange happens digitally on your app, so it doesn't matter if you're in Australia or the US. You'll get the market price no matter what.

What is the Best Rate to Exchange USD to AUD?

The best rate to exchange USD to AUD is the mid-market rate, also known as the interbank rate. This rate is the actual exchange rate that large banks use to trade currencies on the global market.

When you decide to buy AUD from traditional financial institutions, such as Australian high-street banks or Western Union, they will charge hidden fees by offering exchange rates that are weaker than the mid-market rate. This hidden fee, often referred to as an exchange rate margin, adds up quickly and significantly increases the cost of your currency conversion.

How and Where to Buy USD in Australia

Wise is our go-to online money transfer service that offers a user-friendly platform for exchanging currencies at the mid-market rate with transparent, industry-low fixed fees.

Open a Free Wise Account For Transparent and Low-Cost Currency Exchanges

Here are some of Wise's key features that make it an ideal tool for timing your currency exchanges:

1. Mid-Market Exchange Rates: Wise always uses the real, mid-market exchange rate, ensuring you get the fairest rate possible without any hidden fees or markups.
2. Low, Transparent Fees: Wise charges a small, fixed fee for each transfer, which is clearly displayed upfront, so you know exactly how much you'll pay.
3. Auto-Conversion: Wise offers an auto-conversion tool that automatically exchanges your currencies when the rate hits your target, ensuring you never miss an opportunity.
4. Rate Alerts: You can set up email or app alerts to notify you when the exchange rate reaches your desired level, allowing you to stay in the know about your favorable rates.
5. Multi-Currency Account: With Wise's multi-currency account and card, you can hold and manage multiple currencies in one place, making it easier to move money between currencies as needed. Spend your money like a local with a debit card.
6. Fee Free ATM Withdrawals: Wise lets you withdraw $100 US per month or equivalent without fees. Then a 1.75% fee applies.

Learn more: Read our Wise Account review or visit the Wise website

Compare AUD to USD Rates With Monito's Comparison Engine

Fees fluctuate all the time. As a result, Wise will not always be the cheapest option to buy US dollars with Australian dollars. To ensure you're getting the best deal on your currency exchange, run a search on Monito's comparison engine.

Monito monitors the rates and fees of all major money transfer competitors, allowing you to easily find the service offering the best combination of mid-market rates and low fees. By using Monito, you can rest assured that you're getting the most favorable exchange rate with no hidden costs.