The Australian dollar (AUD) has plunged below 60 US cents for the first time since the COVID-19 pandemic, marking its biggest one-day drop in 17 years. On April 7, 2025, the AUD traded at $0.6013 against the US dollar (AUD/USD) after hitting a low of $0.5933 earlier in the day. This significant decline has raised concerns among holidaymakers and importers who now face increased costs.
The AUD has been on a downward trajectory throughout the year, fluctuating around 63 to 64 US cents. However, the recent announcement of tariffs by US President Donald Trump has sent shockwaves through the currency markets, prompting a sharp sell-off. Currency analyst Sean Carrow noted, “The puzzle was how the Aussie dollar stayed strong after Trump’s tariffs.” Yet, the currency could not withstand the pressure for long, experiencing its worst single-day fall since the Global Financial Crisis (GFC) of 2008.
Trump's aggressive trade measures have triggered fears of a global recession, further pressuring the AUD. China, Australia’s largest trading partner, retaliated against the US tariffs, intensifying concerns about slowing global growth. ANZ analyst Felix Ryan commented, “The AUD is highly attuned to global risk sentiment. When risk rises, the AUD weakens.”
As a result of this decline, the AUD is underperforming against several major currencies: the US dollar (AUD/USD) is down 8.53% over the past year, the Euro (AUD/EUR) has dropped 9.77%, the British Pound (AUD/GBP) is down 10.45%, and the Japanese Yen (AUD/JPY) has fallen by 12.01%.
The falling AUD presents a double-edged sword for Australians. On one hand, it means higher costs for overseas travel and imported goods, making destinations in Europe and the US more expensive for Aussie tourists. On the other hand, the weaker dollar is beneficial for Australian exporters, as it makes local goods and services cheaper for international buyers, potentially boosting demand.
Looking ahead, analysts are questioning whether the AUD will continue to fall. The last time the dollar traded below 60 US cents was during the COVID-19 crash in 2020, and prior to that, it remained under this threshold from 2000 to 2003. Carrow warns that the AUD could remain weak for some time, stating, “It’s very weak against the USD and European currencies. A terrible time to travel to Europe.” However, he added that a glimmer of optimism in global markets could help the AUD regain some ground.
As of Monday afternoon, the AUD had recovered slightly, hovering back above 60 US cents. This rebound came after the currency hit a fresh five-year low of 0.5933 earlier in the day. The recovery is attributed to discussions among Chinese officials regarding potential monetary stimulus to stabilize their economy in light of the escalating trade tensions.
The ongoing trade conflict between the US and China, which began in early 2018, has intensified with Trump's recent tariff announcements. The US has imposed a reciprocal tariff of 54% on Chinese goods, while China has retaliated with a 34% import duty on US products. This escalation has raised fears of a systemic shock to the global economy.
Rodrigo Catril, a senior foreign exchange strategist at NAB, emphasized the precarious situation of the AUD, stating, “The Australian dollar is in no man’s land as trade tensions between the US and China become more volatile.” He warned that the risks of a systemic shock are increasing, and the dollar does not perform well in such circumstances.
For Australian consumers, the implications of a weaker dollar are significant. Diana Mousina, deputy chief economist at AMP, noted that travelers and importers will feel the hit most acutely. Since April 1, the AUD has fallen against popular travel currencies, with the biggest drop against the Japanese yen at 6.42%. The British pound and Chinese yuan have also seen declines of around 4%.
As higher prices loom for overseas goods, experts suggest that shoppers may want to make purchases sooner rather than later before trade-exposed businesses increase their prices. Mark Baartse, a retail consultant, remarked, “A lot of transactions are pegged to US dollars, regardless of where you buy from.”
Despite the current volatility, some analysts are optimistic about the AUD's potential recovery. Mousina forecasts that the dollar could rise back to around 70 US cents over the next two years, driven by a rebound in the export market. However, this potential gain may be offset by inflated import costs due to the weaker currency.
As the Australian economy grapples with the fallout from Trump's tariffs and the ongoing trade war with China, the future of the AUD remains uncertain. Investors and consumers alike will be watching closely as market conditions evolve and the impacts of these economic tensions unfold.
