What does it mean for a normal citizen like me when my country's dollar value goes down?

Question

I live in Australia.

From what I can see in the past few years (and still ongoing), the AUD value just seems to go down. Right now, 1 AUD=0.86 USD, and from what I've read in some websites, it's predicted that the AUD will go down to 0.75 USD.

What does this mean for me? Is this a good sign, or a bad sign? Should I invest in foreign dollars? Is my general value going down?

---

P.S. I'm not so sure how to tag this.

Answer 1

This may make Australian exports cheaper, which can be a good thing. However it is at the expense of making imports more expensive. Look to Japan, which is devaluing their currency, and is a large importer of energy:

I wont say its bad or unnecessary to hold money in other currencies. However, keep in mind that all AUD-denominated assets will, or at least should, rise as the currency falls. If just AUD/USD falls this may not apply, but if AUD is weakened all around it should hold true. Again, look to Japan, where the Nikkei is closely correlated with the strength of the yen:

Another possibility is to buy gold which should rise in AUD terms but other forces are at work with gold price so some would not agree with this.

Answer 2

Essentially imported goods from the country (in this case the US) that is improving against your local currency will become more expensive. For the most part, that is the only practical effect on you on an individual financial level.

Answer 3

There are several possible effects:

• if you buy things that are imported from the US, or bought from other countries with US dollars, those items will be more expensive for you
• if you (or your employer) sells things to the US, or sells them for US dollars, then you or your employer will get more money for the same goods or services, and/or will be able to lower the US dollar price (thus selling more stuff) while still getting as many local dollars as before. This can put money in your pocket directly, or make your employment more secure
• if your country's economy as a whole relies on exporting, the economy as a whole may experience this effect, to the extent that the government can do things like lowering taxes or at least not raising them so much. But if, as is more likely, your economy relies on importing, everyone will start to feel a pinch from the increased prices, and the economy will tighten. This could lead to layoffs, tax increases, or other things you won't like

There isn't much you could do about it. If you had enough money to try to hedge by buying foreign securities, in theory you could be happy no matter what your dollar did: if it goes up, you have pain or gain from local effects (depending on whether imports or exports have a bigger effect on your life) and that is offset by your investment having gain or pain. Ditto if it goes down. In reality the amount you might have to invest to get to this point is probably not a realistic amount for an ordinary person to invest outside their country.

I own a Canadian company that bills a number of US clients and I buy very little from the US (I'm big on local food, for example, and very frugal on the consumer-goods front.) When the Canadian dollar falls, I effectively get a raise, so I'm happy while all around me are wringing their hands.

Answer 4

One more effect that's not yet been mentioned is that companies based in Australia and listed on the Australian Securities Exchange, but which do most of their business overseas, will increase their earnings in AU$, since most of what they earn will be in foreign currencies. So their shares are likely to appreciate (in AU$).