The US dollar is under pressure in 2025, with ongoing volatility rattling global markets. For Australians, the knock-on effects are real—from cheaper overseas holidays to shifts in commodity prices and investment returns. But who are the biggest winners and losers from a weak greenback, and what should you do about it?
Why the US Dollar is Weak in 2025
Several forces are driving the US dollar’s slide this year. Persistently high US government debt, slower-than-expected economic growth, and the Federal Reserve’s dovish stance on interest rates have all contributed. Meanwhile, global investors are diversifying away from the dollar, seeking safety in gold and other currencies. The AUD/USD exchange rate has surged above 0.75 for the first time since 2021, giving Australian consumers and businesses more purchasing power for imports.
- US interest rates: Cuts by the Fed to combat a sluggish US economy have reduced the appeal of the dollar.
- Global diversification: Central banks in Asia and Europe are shifting reserves into non-dollar assets.
- Commodity cycle: Higher global prices for iron ore and LNG have boosted the Aussie dollar, amplifying the greenback’s weakness.
Who Benefits? Travel, Imports, and Aussie Investors
A weak US dollar isn’t bad news for everyone. In fact, some Australians stand to gain:
- Overseas travellers: Airfares, accommodation, and shopping in the US and other dollar-linked destinations are more affordable. Expect a surge in outbound travel bookings through 2025.
- Importers: Businesses sourcing electronics, vehicles, and machinery from US suppliers are seeing lower costs, which could translate to cheaper prices for consumers.
- Investors in US assets: Those who bought US stocks or ETFs when the dollar was strong can now cash in, as their gains are worth more in Aussie dollars when repatriated.
- Students: Australians studying in the US or paying for US-based online courses benefit from reduced tuition and living expenses.
Who Loses? Exporters, Tourism, and Super Funds
But a weaker US dollar creates headwinds for others:
- Exporters: Australian agricultural and mining companies are less competitive in the US market, with contracts denominated in USD now yielding less when converted to AUD.
- Tourism operators: Fewer American tourists may visit Australia, as their greenbacks don’t stretch as far. That’s a blow to local tourism in hotspots like Cairns, the Gold Coast, and Sydney.
- Superannuation funds: Many supers are heavily invested in US equities and real estate. As the dollar weakens, the value of these overseas holdings drops in AUD terms, potentially impacting 2025 returns.
Smart Moves for Aussies in a Weak Dollar Era
So, how can Australians make the most of the current currency landscape?
- Review your investment mix: Diversify globally, but hedge US dollar exposure where possible. Consider sectors or regions that benefit from a strong Aussie dollar.
- Plan big-ticket purchases: Now is a smart time for buying US-made goods, booking overseas travel, or importing business equipment.
- Monitor super fund allocations: Ask your fund about currency hedging strategies, especially if you have a large international equity component.
- Stay informed: With the RBA and US Federal Reserve both signaling further policy shifts in 2025, currency markets could swing again. Regularly review exchange rates and economic updates.
Looking Ahead: Will the Dollar Stay Weak?
Most analysts expect the US dollar to remain subdued through late 2025, barring a dramatic recovery in US economic growth or a geopolitical shock that sends investors flocking back to the greenback. For now, Australians can take advantage of the stronger Aussie dollar—but as with all things in finance, conditions can change fast.
