Key Currency in 2025: What Australian Businesses & Investors Need to Know

In 2025, the term key currency is more than just financial jargon—it’s at the heart of global trade, investment decisions, and even the resilience of Australian businesses. As the global economy shifts and the dominance of traditional currencies is challenged, understanding what a key currency is and how it shapes financial strategies is essential for anyone navigating international markets.

What Is a Key Currency?

A key currency refers to a currency that is widely accepted for international transactions and held as a reserve by central banks and institutions around the world. Traditionally, the US dollar has held the crown as the world’s principal key currency, but in 2025, cracks in this dominance are showing. The euro, Chinese yuan, and even digital currencies are gaining traction, changing the landscape for Australian businesses and investors.

For Australians, the significance of a key currency lies in:

• International Trade: Most global commodities, such as oil and metals, are priced in key currencies, impacting import and export costs.

• Foreign Investment: Investment portfolios often contain assets denominated in key currencies, affecting returns and risk profiles.

• Reserve Management: The Reserve Bank of Australia (RBA) holds key currencies in its reserves to stabilise the AUD and manage external shocks.

2025: A Turning Point for Key Currencies

This year, several trends are reshaping the role of key currencies:

• US Dollar Resilience and Challenges: While still dominant (comprising about 58% of global reserves, according to the IMF), the US dollar faces increased competition from the euro and Chinese yuan. Geopolitical tensions and US fiscal debates have added volatility, pushing businesses to diversify.

• Rise of the Renminbi: China’s ongoing efforts to internationalise the yuan, especially through trade agreements in Asia-Pacific and new Belt and Road initiatives, have made it a more prominent settlement currency. In 2025, several Australian exporters report settling deals in yuan, particularly in mining and agriculture.

• Digital Currencies and CBDCs: The RBA’s pilot with a digital Australian dollar and ongoing developments with central bank digital currencies (CBDCs) worldwide are influencing how businesses think about currency risk and settlement speed.

For example, in 2025, an Australian mining company negotiating a contract with a Chinese steelmaker may now be asked to settle in yuan, reducing reliance on the USD and lowering transaction costs. Similarly, Australian super funds with global portfolios are reviewing their currency hedging strategies as the mix of key currencies evolves.

Implications for Australian Businesses and Investors

Understanding key currency dynamics is more important than ever. Here’s what it means in practice:

• Trade Agreements: New free trade deals in the Indo-Pacific region may specify alternative key currencies, impacting invoicing, payment terms, and hedging needs.

• Risk Management: Fluctuations in key currencies affect input costs and export competitiveness. In 2025, more Australian companies are using multi-currency accounts and forward contracts to manage volatility.

• Investment Decisions: The composition of global reserves and the currencies of global bonds and equities in superannuation portfolios directly affect returns. With the euro and yuan gaining ground, portfolio managers are rebalancing currency exposures.

For instance, a Melbourne-based manufacturer importing machinery from Europe in 2025 may opt to invoice in euros to avoid US dollar volatility and take advantage of more favourable exchange rates. Meanwhile, Australian investors in global infrastructure funds are closely monitoring currency allocations to mitigate risks from shifting key currency dynamics.

Looking Ahead: Staying Agile in a Shifting Currency Landscape

The definition of a ‘key currency’ is evolving. While the US dollar remains pre-eminent, its dominance is being tested by global policy shifts, emerging digital currencies, and changing trade flows. For Australian businesses and investors, staying informed and flexible is critical. This means:

• Regularly reviewing currency exposures and hedging strategies

• Engaging with banks and advisors about multi-currency solutions

• Monitoring global policy changes—such as new trade agreements or central bank announcements—that may affect key currency status

In 2025, those who understand the nuances of key currency trends will be better positioned to seize opportunities and manage risks as the world’s financial system continues to evolve.