Your US stock returns depend on two things. Most investors only track one.
Australian investors buying US stocks on Stake think in USD — Apple's up 12%, Nvidia's up 30%. But your actual return is in AUD. The AUD/USD exchange rate silently adds to or subtracts from every US position you hold, every day. Here's how it works, with real numbers.
Not financial advice. Exchange rate data sourced from Trading Economics, Federal Reserve, and public sources as of August 2026.
Key takeaways
- ·Your AUD return on US stocks = the stock's USD return + the AUD/USD movement. Both matter.
- ·A falling AUD is a tailwind: your USD holdings convert to more AUD. A rising AUD is a headwind.
- ·The AUD tends to fall when global markets sell off — which partially cushions AUD-denominated losses on US stocks during downturns.
- ·Stake's 0.55% FX fee is a one-time deposit cost — separate from ongoing currency risk, which continues for the life of your position.
- ·Most Australian retail investors hold US stocks unhedged. Hedged ETFs (VGAD vs VGS) eliminate currency risk but add ~0.03%/year in fees and remove the natural hedge benefit.
How AUD/USD affects your returns — the basics
When you buy a US stock on Stake, you exchange AUD for USD at the prevailing exchange rate. Your stock position is now valued in USD. Every day, two things affect your AUD wealth from that position:
1. The stock price (in USD)
If Apple rises 10% in USD terms, your USD holding is worth 10% more. This is what most investors track.
2. The AUD/USD rate
If the AUD falls 5% against USD, every USD you hold converts to 5% more AUD — even if the stock price doesn't move at all.
Your actual AUD return is approximately the combination of both effects. A 10% USD gain combined with a 5% AUD depreciation produces roughly a 15% AUD return. A 10% USD gain combined with a 5% AUD appreciation produces roughly a 5% AUD return.
The AUD/USD rate fluctuates daily. For positions held over months or years, the cumulative currency effect can be substantial — sometimes larger than the stock's own price movement over the same period.
Worked examples
Both examples start with the same investment: A$1,540 buys US$1,000 of a US stock at AUD/USD = 0.65.
Scenario A: AUD falls from 0.65 → 0.60 (stock price unchanged)
| At purchase | At sale (3 months later) |
|---|---|
| AUD/USD = 0.65 | AUD/USD = 0.60 |
| Stock price: US$1,000 | Stock price: US$1,000 (unchanged) |
| Cost: A$1,538 | Sale proceeds: A$1,667 |
Result: +A$129 gain (+8.4%) — with zero movement in the stock price.
The AUD depreciation did all the work. Your US$1,000 was always worth US$1,000 — but the weaker AUD meant it took more AUD to buy that same USD when you sold.
Scenario B: AUD rises from 0.65 → 0.70 (stock price unchanged)
| At purchase | At sale (3 months later) |
|---|---|
| AUD/USD = 0.65 | AUD/USD = 0.70 |
| Stock price: US$1,000 | Stock price: US$1,000 (unchanged) |
| Cost: A$1,538 | Sale proceeds: A$1,429 |
Result: −A$109 loss (−7.1%) — with zero movement in the stock price.
A stronger AUD means your US$1,000 buys fewer AUD on the way out than it cost on the way in. The stock didn't fall — the currency movement created a loss.
Illustrative examples only. Does not include brokerage, FX fee, tax, or dividends. Actual returns will vary.
When both effects combine
Real-world returns combine stock price movement and AUD/USD movement simultaneously. The table below shows the AUD return for different combinations — starting from AUD/USD = 0.65, selling at 0.60 (AUD falls) or 0.70 (AUD rises).
| Stock USD return | AUD/USD 0.65 → 0.60 (AUD falls) | AUD/USD unchanged (0.65) | AUD/USD 0.65 → 0.70 (AUD rises) |
|---|---|---|---|
| +20% | +30.0% | +20% | +11.4% |
| +10% | +19.2% | +10% | +2.1% |
| 0% | +8.3% | 0% | −7.1% |
| −10% | −2.5% | −10% | −16.4% |
| −20% | −13.3% | −20% | −25.7% |
Approximate AUD returns. Calculated as (1 + USD return) × (entry rate / exit rate) − 1. Excludes fees and tax.
AUD/USD through the years — key events for investors
The AUD has ranged from under 0.55 to above 1.10 over the past 15 years. Each move had significant implications for Australian investors holding US assets.
2011 peak
~$1.10
Mining boom, strong commodity prices. AUD briefly exceeded USD parity. US stock holders saw AUD returns compressed vs USD.
2015–16 mining bust
~0.68–0.72
Iron ore price collapse, China slowdown. AUD fell sharply. Holders of US stocks received a tailwind.
COVID low (Mar 2020)
0.5511
17-year low in one week. Severe global risk-off. US stock AUD returns cushioned vs USD losses.
COVID recovery (2021)
~0.78–0.80
Vaccine rollout, commodity rally. AUD recovered strongly. Unhedged US stock holders saw AUD returns lag USD gains.
2022 Fed rate hikes
~0.62–0.70
USD strengthened as Fed hiked aggressively. AUD weakened — a tailwind for existing US stock holders.
April 2026 tariff shock
Dipped sharply
US tariff escalation caused AUD sell-off as a commodity currency. Followed by rapid recovery to 0.7260 by May 13.
August 2026
~0.70
Post-Geneva truce. AUD up ~5% YTD in 2026. Running 2026 average: ~0.7031.
The pattern: The AUD tends to weaken during global risk-off events (recessions, trade wars, commodity slumps) and strengthen during risk-on periods (commodity booms, strong global growth). This correlation means unhedged US stocks often provide a natural cushion during Australian-market downturns.
The natural hedge: why unhedged often wins for Australians
There's a structural reason most Australian financial advisers recommend holding international stocks unhedged: the AUD tends to fall at the same time as global equity markets.
The AUD is a "risk currency" — when investors globally become fearful, they sell risk assets including the AUD and buy USD (a safe-haven currency). This means:
When global markets fall in USD — the AUD usually falls too
Your US stocks lose value in USD, but the weaker AUD means each USD is worth more AUD. The currency effect partially cushions the loss for Australian investors.
When global markets rise in USD — the AUD usually rises too
Your US stocks gain in USD, but the stronger AUD compresses the AUD return. You still make money, just less than the headline USD gain suggests.
This correlation isn't perfect — and there are periods where the AUD and global stocks diverge (as in 2022, when both fell together as the RBA hiked rates). But over long periods, the risk-correlated nature of the AUD provides a genuine cushioning effect for Australian investors holding unhedged global stocks.
COVID example (March 2020)
The S&P 500 fell ~34% in USD terms from February to March 2020 lows. The AUD simultaneously fell to 0.5511 — a 17-year low. Australian investors holding unhedged US stocks saw AUD-denominated losses of roughly 15–20% — significantly less painful than the 34% USD loss because of the currency cushion.
VGS vs VGAD: hedged or unhedged?
The most common way Australian retail investors access international shares is through index ETFs on the ASX. The two Vanguard options illustrate the hedged vs unhedged choice clearly:
| VGS — Unhedged | VGAD — Hedged | |
|---|---|---|
| Full name | Vanguard International Shares ETF | Vanguard International Shares (Hedged) ETF |
| Currency exposure | AUD/USD (and other currencies) moves affect your return | Currency hedged — returns track the underlying stocks, not FX |
| Management fee | 0.18% p.a. | 0.21% p.a. |
| Outperforms when… | AUD falls (gives extra AUD return) | AUD rises (removes the AUD headwind) |
| Natural hedge benefit | Yes — AUD tends to fall when stocks fall | No — hedging removes this cushion |
| Best for… | Long-term buy-and-hold investors comfortable with currency volatility | Investors who want pure equity exposure with no FX noise |
Recent performance note: In 2025–26, as the AUD strengthened following the tariff truce and commodity recovery, VGAD outperformed VGS because it removed the AUD headwind. When the AUD was falling (2022, COVID), VGS outperformed. Neither consistently dominates — it depends entirely on AUD/USD direction over your holding period.
Stake's 0.55% FX fee: what it is and isn't
Many investors conflate two separate things when thinking about "FX costs" on Stake: the one-time FX fee on deposits, and the ongoing currency risk of holding USD assets. They are completely different:
Stake's 0.55% FX fee
- Charged once on AUD → USD deposit
- Charged once on USD → AUD withdrawal
- Fixed and predictable
- Not charged on each individual trade
- 1.1% round-trip total
Ongoing currency risk
- Changes every day as AUD/USD moves
- Can be positive (tailwind) or negative (headwind)
- Applies to the full value of your holdings
- Separate from Stake's fee structure
- Can't be eliminated on Stake (unhedged by design)
The 0.55% FX fee on a $10,000 deposit is $55 — a one-time, predictable cost. Over a five-year investment, that's $11/year. The currency movements on the same $10,000 holding could easily swing ±$1,500 or more over the same period. The ongoing currency risk is orders of magnitude larger than the FX fee — which is why understanding AUD/USD matters far more than optimising the deposit timing.
Minimising the FX fee: deposit once, trade multiple times
The FX fee is charged on deposits, not per trade. Depositing A$5,000 once and making five separate trades costs 0.55% in FX once, not five times. Keeping USD in your Stake wallet between trades also avoids repeated AUD→USD→AUD conversions.
Ready to start buying US stocks from Australia?
Hello Stake gives Australians direct access to 8,000+ US stocks at US$3 per trade flat. Sign up with referral code jaymem884 for a free US stock + $10 credit.
Open Stake Free — Code jaymem884Not financial advice. Currency risk exists on all foreign currency investments.