After years of strength, the U.S. dollar is now facing a sharp reversal. In 2025, it has fallen significantly—dropping 13% against the euro and 6% versus the Japanese yen—marking its worst start to the year in over five decades.
This downturn is reshaping the global financial landscape, hitting American wallets both abroad and at home. For travelers, especially, the difference is becoming increasingly noticeable.
A Changing Landscape for American Tourists
In recent years, Americans enjoyed a favorable exchange rate that made international travel and shopping abroad much more affordable. That trend has now flipped. Tourists heading to Europe or Asia are seeing their dollars stretch far less than they did in 2024.
Take Albert Tartaglia, an accountant from Indianapolis. On a previous trip to Spain, he bought specialty honey and souvenirs without a second thought. This year? He’s reconsidering. “The value isn’t what it used to be,” he noted before heading overseas.
Even everyday expenses like meals are forcing travelers to budget differently. Brandon Lowery, a professor from Texas, visited Scotland with his family and was shocked by how quickly prices added up. A modest dinner could easily climb to $70 once converted. “We ended up at McDonald’s just to keep costs down,” he said.
Despite the weaker dollar, Americans aren’t giving up on travel. A Deloitte survey conducted in May showed that 25% of U.S. consumers still planned to take international trips in the next three months. That’s consistent with prior months and slightly higher than in the same period in 2023 and 2024.
Impacts Beyond Travel: Exports and Investments
While international travel might be getting pricier, the dollar’s drop isn’t all bad news. In fact, it’s a potential windfall for U.S. exporters and investors.
A softer dollar makes American-made products more competitive in global markets. Companies that sell overseas—like those in the S&P 500, where international revenue makes up over 40%—stand to gain. When foreign earnings are converted back into a weaker dollar, profits rise.
This shift could be especially beneficial as earnings season begins. “Export-focused businesses are likely to see a boost,” said Lori Heinel, CIO at State Street Global Advisors, which oversees nearly $5 trillion in assets.
A Tailwind for Global Investments
For U.S. investors with international holdings, currency fluctuations are working in their favor. When the dollar declines, gains in foreign stock markets often look even better after conversion.
That’s exactly what’s happening in 2025. An MSCI index tracking non-U.S. stocks is up 19% in dollar terms, with nearly half of that return driven by currency gains. Vanguard’s international index fund has surged 17% this year—outpacing the S&P 500’s 6.6% rise by a wide margin.
According to J.P. Morgan Asset Management’s David Kelly, this is an ideal time for Americans to rethink their portfolio balance. “Many U.S. investors are overexposed to domestic equities. Now’s the time to diversify,” he said. “There’s a real risk that a sharp drop in the dollar could come from a sudden economic shock.”
Not Enough to Deter Wanderlust
Still, the sting of a weaker dollar isn’t slowing everyone down. Trish Smith, a travel adviser based in Missouri, says her clients—young and old—are pushing ahead with international plans.
“Younger travelers are chasing Instagram-worthy destinations like Bali and Tokyo,” she explained. “And retirees? They’re taking those dream trips they’ve saved for years.”
Whether it’s a once-in-a-lifetime getaway or a strategic investment decision, the dollar’s current slide is having far-reaching consequences. From the aisles of European supermarkets to the balance sheets of multinational corporations, the effects are being felt in very real ways.
For now, Americans may have to adjust their expectations. The era of the all-powerful dollar appears to be on pause.
Tips and Thoughts for Travelers Amid a Weaker Dollar
While travel may be more expensive due to the dollar’s decline, smart planning can help you manage costs and enjoy your trip without overspending. Here are some practical suggestions:
1. Monitor Exchange Rates Before Your Trip
Keep an eye on currency movements during the planning phase. Use apps like XE or OANDA to track rates, and consider exchanging some money in advance if the rate becomes favorable.
2. Use Credit Cards with No Foreign Transaction Fees
Choose cards that don’t charge foreign exchange fees. This small step can save you up to 3% on every purchase made abroad.
3. Book Early and Take Advantage of Deals
Flights and hotels are often cheaper when booked in advance. Look out for promotions and consider traveling during off-peak seasons to cut costs.
4. Consider Cheaper Alternative Destinations
Instead of Western Europe or Japan, consider countries that offer rich cultural experiences at lower costs, like Portugal, Georgia, Vietnam, or Colombia.
5. Be Flexible with Accommodation and Dining
Platforms like Airbnb offer lower-cost stays compared to hotels. Try small local restaurants—they often serve authentic food at more reasonable prices than tourist-heavy spots.
6. Set a Daily Budget and Stick to It
Break down your expenses into a daily limit. This keeps you aware of currency impacts and helps avoid unnecessary spending.
7. Use Local Transportation
Buses, trains, and metros are inexpensive and efficient in most foreign cities. Avoid taxis unless necessary.
8. Carry Some Local Cash for Emergencies
Even if you mostly use cards, it’s wise to have a small amount of local currency on hand in case you encounter places that don’t accept digital payments.