How a falling dollar is changing American spending—from vacation habits to investment strategies

According to the ICE US Dollar Index, the greenback just posted its worst first half in over five decades. (Courtesy: Reuters photo)

American travellers used to stretching their dollars abroad are facing a different reality this summer. The US dollar is weakening sharply, making vacations more expensive—but opening new opportunities for global investors, the Wal Street Journal reported.

According to the ICE US Dollar Index, the greenback just posted its worst first half in over five decades. It has fallen 13% against the euro and 6% against the yen in 2025, reversing the strong dollar trend that defined the past few years and powered booming travel, cheaper imports, and robust international spending.

From travel boost to budget squeeze

When the dollar was strong in 2024, Americans enjoyed enhanced purchasing power overseas. But with the dollar now weaker, even everyday expenses abroad feel steeper. Travelers like Albert Tartaglia, visiting Spain this summer, say they are now thinking twice before spending freely. “I might be inclined to limit what we get,” said the Indianapolis-based accountant.

Investors feel the upside

For global investors, the story is more optimistic. A weaker dollar makes American goods cheaper abroad—boosting US exports—and amplifies returns on international investments. Over 40% of revenue from S&P 500 companies comes from overseas, and analysts expect earnings this quarter to get a lift from favourable exchange rates.

The MSCI index of global stocks excluding the US is up 19% in dollar terms so far this year—nearly half of that gain coming from currency appreciation. Vanguard’s Total International Stock ETF is up 17% in 2025, nearly tripling the S&P 500’s gain of 6.6%.

Why the dollar is falling

The dollar’s decline has been fuelled by a mix of factors: the Trump administration’s aggressive trade policies, worries over the ballooning US national debt, and a narrowing gap between American interest rates and those in other major economies. Some analysts expect further declines.

“The fundamentals have been gradually deteriorating beneath the economy of the dollar,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “If we get some shock, the potential for a big dollar decline is there.”

Everyday spending hits travellers

The dollar’s slide has real-time effects. Brandon Lowery, a Houston-based professor, said his family opted for a McDonald’s dinner in Scotland to avoid a $70 restaurant bill. He’d booked his trip when the pound was at $1.25 but watched it climb to $1.35 during his vacation.

Small increases, he noted, “start to tick up whenever it hits the credit card.”

Still not stopping wanderlust

Yet travel demand remains resilient. A Deloitte survey in May found that one in four US consumers planned to travel internationally in the next three months—comparable to last year.

Trish Smith, a Kansas City travel adviser, said most of her clients aren’t changing plans. “It’s a bucket-list trip—we’re going anyway,” she said, reflecting the sentiment of many travellers determined not to let exchange rates cancel their dreams.