You receive back the payment in the currency in which the transaction was completed - that is, if the item is listed by a seller as US$770.00, that is the amount that you must pay. Of course in order for you to pay that amount, your payment processor (your credit card, PayPal, whatever it may be) OR your payment provider (bank where you have an account, your credit card provider, etc) will perform a currency conversion. There'll be a fee involved, and of course you don't get that fee back. Additionally there's a risk that you'll lose Australian dollars if a refund occurs, because you didn't pay the seller $1158.00 in Australian dollars; you paid $770 in US dollars.
It cost you AU$1158.00, but that is not the same thing as the transaction amount being AU$1158.00.
If the currency exchange rate is in your favour, you'd receive back more AUD than you paid. If the currency exchange rate is not in your favour, you'd receive back a lesser amount in AUD than you paid. That's one of the risks in buying internationally.
PayPal explain that:
❝Why is the refund I received different from the amount I originally paid?
If your payment involved a currency conversion, the refund you received may be different from the original payment amount. This is due to fluctuations in currency conversion rates.
Where a payment involves a currency conversion, we apply the conversion rate at the time of payment. Similarly, if a payment is refunded, we apply the conversion rate at the time of the refund.
The conversion rate at the time of the refund may be different from the conversion rate on the original payment. For this reason, the refunded amount may not be the same as the original payment amount.❞
