The moving dollar: why Australia’s exchange rate is becoming another business pressure

As the Australian dollar slips against the US currency, import bills rise and some exporters gain breathing room. The challenge is protecting a business when the advantage can change direction.

An Australian business can negotiate a good price, secure a customer and organise delivery, only to discover that its expected profit has changed before the invoice is paid.

The product has not changed. Neither has the agreed price in US dollars.

The exchange rate has.

The Reserve Bank’s latest published figures put the Australian dollar at US69.33 cents on Friday, 2 October, down from US69.77 cents on 30 September. These are reference rates; the rate offered for an actual transaction will include the provider’s pricing.

The movement over those two days was modest. But it illustrates a broader commercial problem: Australian businesses earn, spend and make promises in currencies whose relationship keeps changing.

For importers, a falling dollar can increase costs. For exporters receiving US dollars, it can lift Australian-dollar revenue. For businesses that do both, the outcome requires a closer look.

There is no exchange rate that makes every Australian better off.

The importer’s problem: the same goods cost more

Consider an illustrative US$100,000 shipment.

At US70 cents to the Australian dollar, paying the supplier requires approximately A$142,857. At US65 cents, the same invoice requires approximately A$153,846.

That is nearly A$11,000 extra before bank charges, freight, insurance, duties or other costs. These are hypothetical exchange rates, not a forecast.

If the importer has already promised customers a fixed Australian-dollar price, the additional cost can come directly out of its margin.

Businesses potentially exposed include retailers buying overseas stock, manufacturers purchasing components and firms importing machinery. Exposure can also extend to digital services billed in US dollars.

The relevant question is the currency on the invoice, rather than simply the country from which the purchase comes.

A business buying goods from an Asian supplier may still have a US-dollar obligation.

Raising the selling price is one response. But customers may resist, competitors may have bought stock at a better rate, and existing contracts may prevent an immediate adjustment.

The pressure therefore appears in several places: profit, prices and the cash needed to complete the purchase.

Exporters can benefit—but revenue is not profit

Reverse the transaction.

An exporter receiving US$100,000 would convert it into approximately A$142,857 at US70 cents, or A$153,846 at US65 cents, before conversion costs.

For the same US-dollar receipt, the weaker Australian dollar produces more local currency.

That can help a business whose wages and other major expenses are paid in Australian dollars. Alternatively, an exporter quoting in Australian dollars may become cheaper for overseas buyers.

But the apparent windfall can shrink if the business also buys imported equipment, components or other inputs. A stronger export receipt does not automatically mean a stronger bottom line.

Existing currency hedges may also mean a business receives a previously agreed conversion rate rather than today’s rate.

Nor can a favourable currency create customers who lack the money or inclination to buy.

The distinction matters: a lower dollar can improve the economics of a sale without guaranteeing the sale itself.

Why higher Australian interest rates do not settle the issue

The dollar is influenced by more than conditions inside Australia.

The RBA identifies relative interest rates, commodity prices and investor appetite for risk among its important drivers.

Australian rates can rise without the currency rising if overseas rates, expectations or investment opportunities move more strongly in the other direction.

Similarly, the Australian dollar can weaken against the US dollar without weakening by the same amount against every other currency. The RBA’s trade-weighted index provides a broader measure against a basket of trading-partner currencies.

For an individual business, however, the most important rate is the one attached to its actual payments and receipts.

A general economic forecast is little comfort when a particular invoice falls due.

The household connection

The exchange rate is also part of the cost-of-living story.

A depreciation can make overseas goods and services more expensive in Australian dollars, although the effect on consumer prices varies and takes time.

Businesses may absorb some costs, have stock purchased earlier, or hold contracts that delay the impact.

For a US-dollar-priced fuel purchase, the arithmetic contains two moving parts: the fuel price and the exchange rate. Even an unchanged US-dollar price costs more Australian dollars when the currency weakens.

Conversely, a stronger Australian dollar can reduce that converted cost.

This helps explain why Australians can experience pressure from overseas markets even when nothing about their own spending habits has changed.

How businesses can adapt

The first step is to understand the exposure.

A useful schedule records the currency, amount and expected date of each overseas payment and receipt, alongside any protection already arranged. It should include commitments made through quotations and orders, rather than waiting until invoices arrive.

From there, several practical responses deserve consideration.

Test the margin at different rates. Calculate whether an order remains profitable under less favourable exchange-rate scenarios. A transaction that works only at today’s rate leaves little room for movement.

Review quotation periods and contract terms. Long fixed-price commitments can leave a business carrying currency risk for months. Shorter quotation validity or an agreed exchange-rate adjustment mechanism may help where customers accept it.

Match receipts and payments where possible. A business receiving US dollars and paying US-dollar suppliers may be able to use those receipts directly. Timing and amounts still matter; the remaining balance remains exposed.

Consider protection for confirmed commitments. A forward exchange contract fixes a rate for an agreed future currency exchange. It can provide budgeting certainty but also prevents the business benefiting from a more favourable rate on that contracted amount. Obligations, pricing and the consequences of changing or cancelling the transaction need to be understood with a qualified adviser.

Plan the cash requirement. A dearer import invoice may require more working capital before stock is sold. Buying extra inventory early can reduce one exposure while increasing storage, financing and unsold-stock risks.

These measures are about keeping a viable commercial transaction viable. Trying to predict the perfect conversion day is a different undertaking.

The Times View

A stronger dollar helps some Australians and disadvantages others. A weaker dollar reverses many of those effects.

The deeper challenge is making long-term commitments while the value of the money used to fulfil them keeps moving.

Exporters should examine the costs behind their improved receipts. Importers should examine the exposure behind their advertised prices. Both need to understand what happens between agreeing to a transaction and settling it.

A business cannot control the Australian dollar. It can decide how much of its future it leaves dependent on where the dollar happens to land.