Is It a Good Time To Convert My USD to AUD Right Now?

Timing the foreign exchange market can be challenging due to the many variables affecting market movements. Additionally, you need to find the best exchange rates and avoid hidden fees when purchasing Australian dollars.

You may be an Australian holding USD as a safe currency or an American planning a trip to Australia. In both cases, you'll want to convert to AUD when the US dollar is at its strongest. Thankfully, online solutions like Wise simplify this process by offering the mid-market exchange rate and providing auto-conversion tools.

In this article, we'll delve into the factors influencing currency exchange rate forecasts between USD and AUD and introduce Wise, which facilitates transparent, cost-effective currency conversions. By the end, you'll gain a better grasp of when to buy Australian dollars with your US dollars and how to secure the most best deal possible.

When Is the Best Time to Exchange USD to AUD?

On March 22, 2020, the exchange rate was 1 USD = 1.74 AUD, which was the peak of the last 5 years. This would have been the best time to buy Australian dollars with US dollars. Conversely, the lowest point was on February 25, 2021, when 1 USD = 1.25 AUD. This would have been the worst time to buy Australian dollars with US dollars in recent years.

The key is to buy when the US dollar is stronger than the Australian dollar, meaning 1 USD will get you more AUD.

Factors That Influence USD-AUD 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.

Is It a Good Time To Buy Australian Dollars With US 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 buy AUD sooner rather than later. 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 US dollar is sufficiently strong enough for you or if it's worth waiting for it to get stronger.

Monitor the USD-AUD Exchange Rate

A more straightforward strategy is to keep an eye on the USD-AUD 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 USD has performed against the AUD 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.

Is It Better to Exchange Money in 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 USD traveling to Australia, it is cheaper to simply use a debit card without foreign transaction fees to take out cash at an ATM in Australia. 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.

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

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. 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.

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

Compare USD to AUD Rates With Monito's Comparison Engine

Fees fluctuate all the time. As a result, Wise will not always be the cheapest option to buy Australian dollars with US 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.