Currency traders had a busy week, and the effects reached far beyond Wall Street. The US dollar’s 19-month high came on Friday, after strong gains driven by rising bets on a larger Federal Reserve rate hike, according to Reuters.
What is driving the rally
Fed officials this week warned that US inflation remains stubbornly high, and some signalled openness to a 50-basis-point increase if price pressures don’t ease. Traders now see a 14.5% chance of such a large hike next month, up from zero last week. Two-year Treasury yields rose 34 basis points over two sessions, the sharpest two-day jump in three and a half years. The dollar index stood at 103.17, its highest since April 2025. Yields also rose after President Donald Trump said America does not need a deal with Iran.
The yen and the euro
Japan’s yen sat at 159.875 per dollar, close to the 160 line that has traders watching for official action. Finance Minister Satsuki Katayama said Tokyo will respond appropriately to currency volatility. The euro slipped to $1.1049, near its weakest against the dollar since April 2025, and has lost 0.8% on the week. Tech stocks are also unsettled after Nvidia chief Jensen Huang’s departure. One strategist said a sharp equity sell-off could weigh on the dollar, though momentum may continue if Fed speakers back a bigger hike.
Why Africa should care
A stronger dollar tends to hurt economies that import fuel, wheat and machinery, because those bills are mostly paid in dollars. It also raises the cost of repaying dollar-denominated debt, which many African governments and companies carry. Higher US interest rates can pull investment away from emerging markets too. That is general economic logic rather than a forecast for any single country, but it explains why African finance ministries follow the Fed so closely.
Oil adds another twist. US crude futures rose 2.55% on Thursday after Houthi attacks on Saudi energy infrastructure and continued shipping disruption in the Strait of Hormuz. For importers across the continent, a pricier dollar and pricier fuel together make a tough combination.
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