It’s a lucky day for Aussies sending money overseas. The Australian dollar (AUD) is at its strongest in five months, despite a recession on the horizon.
This morning the AUD was edging towards 70 US cents, soaring to levels not seen since early January.
At 11.30am AEST today, the AUD was worth 69.68 US cents, according to the XE Currency Chart.
An hour later, it slid down to 69.25 US cents - a slight hiccup, but still around the five-month high.
This decline came after the Australian Bureau of Statistics (ABS) released its latest figures on the Gross Domestic Product (GDP).
According to the new data, Australia’s economy shrank by 0.3% over the March quarter. If the next quarter also records a GDP contraction (and it almost certainly will), then the nation will fall into its first recession in three decades.
Why has the Aussie dollar bounced back?
While the economic outlook doesn’t look good for Australia, the local currency has largely rebounded from its nosedive back in mid-March when news of the COVID-19 pandemic broke.
The Australian Broadcasting Corporation reported that since its mid-March plunge, the AUD has jumped about 25% in value against the US dollar (USD).
The question is, why?
International money transfer (IMT) provider OFX said one reason is the surging cost of iron ore.
“Iron ore pushed through $100 a tonne on Friday as increasing demand [from China] and issues with supply [in Brazil, a major iron ore supplier] forced prices sharply higher,” OFX wrote in its currency update.
With iron ore being one of Australia's biggest exports, higher demand for it generally pushes up demand for the Aussie dollar too.
Other factors have also contributed to the AUD upturn, including growing confidence in Australia’s economic recovery, given its success in ‘flattening the curve’ compared to other countries with much higher infection rates.
What this means for your money transfer
A stronger AUD means better exchange rates are on the table for Aussies looking to pay overseas bills or send emergency funds to family abroad.
Let's do the maths.*
Say, you converted AU$10,000 to USD on March 20 when the mid-market exchange rate was at a low 0.57409. You would have received about US$5,740 in return.
But when the mid-market rate surged to 0.69688 earlier today, the exact same conversion would have been worth about US$6,968.*
That's a massive US$1,228 in savings, just from waiting for more favourable exchange rates.
And right now if you transfer AU$10,000 to the US, you could also save US$286, by hopping onto the average IMT specialist exchange rate rather than the average big four bank rate.**
To check out a range of IMT specialists and compare their exchange rates, you can scroll down below, or jump on over to our international money transfer comparison table for even more options.
*Calculations are based on mid-market exchange rates drawn from the XE Currency Charts, and exclude any exchange rate mark-ups and transfer fees.
**Mozo data, as of 3.50pm, 3 June 2020