The Australian dollar has spent much of 2025 trading below the 65 US cent mark, and for many Australians that number carries real consequences. Whether you are planning a holiday to Europe, importing goods from Asia, or running a business with overseas suppliers, a weaker currency reshapes the landscape in ways that deserve a closer look.

For Travellers: The Shrinking Dollar Abroad

When the AUD drops against major currencies, the cost of everything overseas goes up. A hotel room in London that cost $250 a night when the dollar was at 72 US cents now effectively costs $280 or more. Meals, transport, shopping — it all inflates in Australian dollar terms.

This does not mean travel becomes impossible, but it does mean planning matters more than ever. Booking accommodation early, locking in flights when fare sales appear, and using travel cards that offer competitive exchange rates can all soften the blow.

One practical step that many travellers overlook is monitoring exchange rate trends in the months before departure. Rather than converting a lump sum at the airport — almost always the worst rate available — spreading purchases of foreign currency over several weeks can average out the cost. Some foreign exchange providers offer rate alerts that notify you when the AUD strengthens temporarily, giving you a window to buy.

For Importers: Margin Pressure Is Real

Australian businesses that import raw materials, components, or finished goods face a more structural challenge. A weaker dollar means higher input costs, and those costs either eat into margins or get passed on to customers.

In sectors like manufacturing, retail, and food service, even a two or three cent move in the AUD can shift the economics of a supply contract. Businesses with thin margins — and there are plenty in Australia — feel this acutely.

The response varies by industry. Some firms renegotiate supplier terms. Others look for domestic alternatives, though that is not always feasible. Many turn to hedging instruments like forward contracts, which allow them to lock in an exchange rate for future purchases. We will explore those in more detail in a future article.

For Exporters: A Silver Lining

It is not all bad news. A weaker AUD makes Australian exports more competitive on the world stage. Mining companies, agricultural producers, and service exporters all benefit when overseas buyers get more bang for their buck.

This is one reason why the resources sector often performs well during periods of AUD weakness. Iron ore, coal, and LNG revenues are typically denominated in US dollars, so a lower AUD means higher revenue in local currency terms, even if the commodity price itself has not moved.

Tourism is another beneficiary. A cheaper Australian dollar makes the country a more attractive destination for visitors from the US, Europe, and parts of Asia. Hotels, tour operators, and hospitality businesses in tourist-heavy regions tend to see an uptick in international bookings when the dollar falls.

The Bigger Picture

Currency movements do not happen in isolation. The AUD’s weakness in 2025 reflects a combination of factors: relatively cautious monetary policy from the Reserve Bank of Australia, strong US dollar momentum driven by the Federal Reserve’s stance, and ongoing uncertainty around China’s economic recovery — a critical variable given that China is Australia’s largest trading partner.

Understanding why the dollar is weak matters as much as knowing that it is weak. If the driver is temporary — say a short-lived bout of risk aversion in global markets — the AUD may bounce back quickly. If the driver is structural, such as a persistent interest rate differential with the US, the weakness could last longer.

What Can You Do?

For individuals, the key is awareness. Track the exchange rate before making large foreign currency transactions. Consider whether timing your purchase or using hedging tools could save you money.

For businesses, the stakes are higher and the tools more sophisticated. Currency risk management is not just for large corporates. Small and medium enterprises with overseas exposure should at minimum understand their currency risk profile and explore whether forward contracts, options, or natural hedging strategies could protect their margins.

The AUD will always move in cycles. What matters is whether you are positioned to weather the dips and take advantage of the recoveries.