The US dollar has been advancing rapidly in response to the Federal Reserve’s resolve to keep raising policy rates for longer to regain control of stubbornly high inflation. This has far reaching consequences. The US dollar is prominently used around the world as an international medium of exchange and as a global reserve currency.
The dollar is strengthening as Africa is already being hit hard by rising inflation triggered by war in Ukraine. As dollar power increases, it is amplifying inflationary pressures across the continent. That’s making it even more difficult for central banks to tame high inflation. Additional pain will be felt as the dollar’s strength ripples through Africa, causing a squeeze on trade volumes, tighter trade financing conditions and burgeoning sovereign debts alongside surging debt-servicing costs.
