Why the weak dollar isn’t stopping Americans from traveling

A last-minute summer flight to Rome might cost less than it did last year—but once you land, your dollar doesn’t stretch nearly as far. In 2025, the headline may read: “Travel is back.” But the fine print tells a more complicated story. A weakening dollar is quietly eroding purchasing power abroad, especially for middle-income American travelers trying to balance wanderlust with household budgeting pressure.

This article unpacks what the falling US dollar means for international travelers, how exchange rates are reshaping travel behavior, and what budget-conscious Americans should watch for when planning overseas trips this year. While airfare is cheaper, the rest of the trip—lodging, food, activities—is not. And the financial trade-offs are clearer than ever.

The US dollar has tumbled sharply this year. The dollar index, which measures the currency against six major peers, fell 10.3% in the first half of 2025—its worst half-year showing since 1973. This isn't just a seasonal fluctuation. The dollar’s weakening reflects structural tensions in the US economy and changing dynamics in global trade and capital markets.

Several key factors are driving this shift:

• Trade Policy Friction: President Trump’s continued trade confrontations with major US partners—particularly in Europe and China—have created volatility. Markets now anticipate long-term tariffs and retaliatory policies, reducing confidence in US exports.
• Monetary Divergence: The Federal Reserve is widely expected to hold interest rates steady or cut them slightly to support domestic consumption. Meanwhile, central banks in Europe and parts of Asia are adopting tighter stances, narrowing the yield differential that once made US assets attractive.
• Fiscal Concerns: Rising deficits and political gridlock over the debt ceiling are further weighing on investor sentiment, especially among foreign holders of US Treasuries. The dollar, once a safe haven, is now subject to credibility drag.

The result? The euro now buys about $0.85—down from $0.93 last year. The British pound buys around $0.73, versus $0.79 a year ago. While these numbers may appear small, the compounding effect on daily spending during international travel is far more pronounced.

At first glance, American travelers might feel optimistic. Airfare prices to Europe and Asia are down—by about 10% and 13%, respectively, according to Hopper. These are levels not seen since pre-pandemic times. Booking platforms like Going.com even report historically low fares to destinations such as Sydney, Dublin, and Rio de Janeiro.

But that’s where the financial cushioning ends. Once abroad, travelers are encountering price inflation fueled not by local economies—but by the exchange rate shift.

Consider the following real examples:

• A London West End theater ticket costing £100 would have been about $125 last year. Now, it’s closer to $137.
• A three-night stay at a Barcelona hotel that cost €850 in June 2024 would have totaled $965. This summer, it’s more than $1,000.
• Even a €12 museum entry ticket—a typical family travel expense—is about 80 cents more per person this year. Multiply that across a group or itinerary and the loss becomes visible.

The weak dollar isn’t producing sticker shock. But it is quietly eroding value—particularly in higher-frequency expenses like meals, tipping, rideshares, and cultural attractions.

Despite these cost pressures, outbound US travel has not collapsed. In fact, passport control volumes at major airports rose 2% this June compared to the same period last year. Travel spending abroad is also up 8.6% in the first four months of 2025, based on Tourism Economics data.

But not all segments are traveling equally—or spending the same way.

Affluent Travelers: High-net-worth individuals are largely unaffected by currency volatility. According to luxury agency Stepping Out Travel Services, demand remains strong for once-in-a-lifetime experiences such as Arctic cruises, African safaris, and curated multi-city European itineraries. These travelers aren’t canceling—they’re optimizing.

However, even here, behavior is shifting. Some clients are requesting fewer flight connections or trimming mid-tier hotel nights to focus spending on signature experiences.

Millennial Professionals: Millennials are increasingly prioritizing international trips over domestic alternatives, often favoring cost-efficient yet culturally rich destinations. Interest has grown in regions where the dollar still holds relative strength—such as South America, parts of Southeast Asia, and Eastern Europe. This group is often more flexible with timing and accommodation style, making strategic trade-offs to preserve overall travel frequency.

Budget-Conscious Families: Families on middle-income budgets are feeling the most squeeze. Some are delaying long-haul trips, opting for shorter regional vacations or postponing travel altogether. Others are adjusting plans mid-booking—dropping excursions, choosing self-catering accommodations, or relying more on credit to stretch their budget.

In a NerdWallet survey, 11% of Americans said they had canceled international travel plans entirely this year due to economic or geopolitical uncertainty.

Exchange rates rarely get the same attention as airfare prices or hotel deals. But in a weakening dollar cycle, they represent a key variable in travel affordability. The problem isn’t just the higher cost of euros or pounds. It’s the unpredictability of when and how those costs show up. Consider the following FX ripple effects:

• Prepaid bookings may mask future costs. A flight booked in April may feel like a win. But if your hotel and food costs rise 5%–7% by August, your total budget could still be blown.
• Currency conversion fees compound quietly. If you’re using a standard credit or debit card with foreign transaction fees (typically 1%–3%), the real cost of your trip could exceed what the exchange rate alone suggests.
• Last-minute purchases take the hardest hit. Unexpected meals, museum entries, or souvenirs bought on impulse often fall outside the pre-trip budget—and face the worst FX terms.

For financially stressed travelers, these invisible costs create repayment risks if credit cards are used as a stopgap.

Bankrate’s Greg McBride put it plainly: “If you’re going to cancel an international trip, it’s not going to be because of the dollar. It’s going to be because you’re worried about getting laid off, you’re worried about geopolitical issues, or don’t have the money saved up and the only way to pay for it is to put it on the credit card and finance it at 20% interest.”

That judgment aligns with findings from Morning Consult, whose surveys show that 31% of Americans cite personal financial stress and the state of the US economy as reasons to reduce interest in leisure travel. That’s higher than any other factor surveyed—including fear of global conflict.

From a household finance standpoint, the weak dollar doesn’t mean you shouldn’t travel. But it does suggest the need for more deliberate budget modeling. Here’s how:

Rebalance Spending Buckets: Don’t overcommit to flights and tours upfront. Leave buffer in your daily spending category for unexpected FX losses. Consider this your “conversion cushion.”

Review Credit Usage Plan: If you plan to charge international expenses, set a 30-day repayment window. Otherwise, interest costs could wipe out any value you tried to capture in off-peak bookings.

Prioritize Cost-Stable Destinations: Look beyond Western Europe. Stronger dollar performance in countries like Colombia, Thailand, or Turkey may preserve more daily value while still delivering rich travel experiences.

Use FX-Friendly Payment Tools: Opt for travel debit or credit cards that waive foreign transaction fees and offer dynamic currency conversion at competitive rates. Apps like Wise or Revolut also help lock in rates before travel.

Adjust Insurance and Coverage Settings: Make sure your travel insurance reflects actual cost exposure in destination currency—not USD assumptions from a year ago. This matters especially for emergency coverage or cancellation triggers.

The dollar’s weakness this year signals more than a temporary inconvenience. It reflects macroeconomic shifts that affect savings value, global capital flows, and US competitiveness. For everyday households, it’s a reminder that financial planning must account for variables beyond domestic inflation or job security.

If your money goals include annual international travel, this is a good moment to recalibrate:

• Are you allocating enough to your “lifestyle fund” each month to absorb FX volatility?
• Are your vacation assumptions based on 2022–2023 cost levels, which were unusually dollar-advantaged?
• Is your long-term plan designed to withstand years where your currency buys less—without resorting to debt?

Travel is still possible. It’s still enriching. And it’s still deeply valuable for many American families and professionals. But in 2025, the rules have shifted. Exchange rates are no longer just a background variable—they’re a frontline cost.

For smart travelers, that means embracing a flexible strategy. One that adapts to global currency shifts, plans for soft costs, and avoids over-reliance on credit. Because the real memory you want to bring back from abroad isn’t financial regret. It’s the kind of experience that was planned with clarity—and enjoyed without post-trip anxiety.

This year, the smartest way to travel is not just to go further, but to spend wiser.