Why Euro’s Rise Should Raise Eyebrows for Aussie Businesses Amidst US Dollar Concerns

Australian small and medium-sized enterprises (SMEs) should be paying close attention to a significant shift unfolding in the global currency markets. The euro has surged to a three-year high against the US dollar, a move described by the CEO of deVere Group, Nigel Green, as a potential “full-blown crisis of confidence in the US currency” and a possible “beginning of the dollar’s long-term decline.”

Speaking on the dollar’s slide to $1.138 against the euro, Mr. Green stated, “It’s a major inflection point. The dollar’s dominance has always rested on a foundation of trust — trust in US stability, trust in open trade, trust in responsible economic leadership. That foundation is cracking, and the euro’s strength is one of the clearest signs that global markets know it.”

This dramatic currency movement follows a period of economic policy uncertainty emanating from the United States, most notably the initial announcement and subsequent backtracking on universal tariffs on US imports. Mr. Green believes this has shaken the fundamental trust underpinning the dollar’s long-standing safe-haven status. “When inflation is stoked internally, when monetary policy is politicized, and when America’s commitment to open markets is abandoned, the basic premise behind the dollar’s safe-haven appeal falls apart,” he explained.

What does this mean for Australian SMEs and the Aussie Dollar?

While the immediate impact on Australian SMEs might seem distant, a weakening US dollar and a strengthening euro can have several implications for the Australian economy and the Australian dollar (AUD).

Firstly, a weaker USD can make Australian exports to countries whose currencies are pegged or closely linked to the dollar more expensive. This could potentially impact the competitiveness of Australian SMEs operating in these markets. Conversely, Australian imports priced in US dollars could become cheaper.

Secondly, the surge in the euro highlights a broader trend of diversification away from the US dollar. As Mr. Green pointed out, “Central banks across Asia, the Middle East, and beyond have been quietly scaling back their exposure to US Treasuries. Bilateral trade deals that bypass the dollar are gaining ground.” This shift could eventually lead to a less dominant role for the USD in global trade and finance.

For the AUD, a weakening USD often, but not always, correlates with a strengthening Australian dollar. This is because both are often seen as risk-on currencies, and a decline in confidence in the world’s reserve currency can lead investors to seek alternatives. However, the specific impact on the AUD will depend on a multitude of factors, including Australia’s own economic performance, commodity prices, and global risk sentiment.

Mr. Green suggests that the euro’s strength is “not just a bet against US policy — it’s a reflection of growing global appetite to diversify away from the dollar altogether.” He warns that if the US “weaponizes its currency and economic size, the rest of the world will respond — and the dollar’s unrivalled position will start to erode.”

Navigating the Shifting Landscape

For Australian SMEs engaged in international trade or with exposure to global financial markets, this potential shift in currency dynamics necessitates careful consideration. As Mr. Green advises investors, “Smart investors must evolve with it — increasing exposure to non-dollar assets, real assets, and markets positioned to benefit from currency shifts.” While SMEs might not directly manage vast investment portfolios, understanding these broader trends is crucial for strategic planning and risk management.

The deVere CEO concludes with a stark warning: “The euro’s surge is the canary in the coal mine. It’s a signal that the dollar’s era of unquestioned dominance is under siege — and the events of this week might ultimately be remembered as the beginning of the end.” Australian SMEs would be wise to monitor these developments closely and consider how a potentially weaker US dollar and a more multipolar currency world could impact their businesses in the long term.

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