The American currency refuses to cool off. The US dollar 18-month high is back in focus this week, and for African importers, borrowers and households, a strong dollar is never just a Wall Street story.
What is pushing the dollar up
The dollar index sat at 102.14 on Monday, not far from the 18-month peak it hit last week. The main driver is the escalating conflict in the Middle East. Investors stayed cautious ahead of US inflation data due Wednesday, which will shape the Federal Reserve’s next move.
The Fed already surprised markets. It raised rates last month for the first time since 2023 to rein in inflation. Traders now see an 81% chance that it holds steady this month. Meanwhile, the euro has been under pressure over European deficit worries, which gives the dollar even more room.
The African angle
When the dollar climbs, it usually becomes costlier for African countries to buy fuel, wheat, medicines and machinery, since most are priced in dollars. Governments and companies that borrowed in dollars also face heavier repayments when their local currencies weaken. Traders in Lagos, Nairobi, Accra and Johannesburg often feel this first, through higher shop prices and tougher import costs.
Oil makes it worse. Brent has hovered above $100 a barrel after Houthi strikes on Saudi targets and attacks on tankers, so countries that import refined fuel are squeezed twice: once by crude prices, and again by the exchange rate.
What to watch
Wednesday’s US consumer price report is the key test. Data last week showed American consumer sentiment slumping as the rising cost of living, tied to the Middle East conflict, soured households’ views. A hot reading could push the dollar higher. A soft one could finally give emerging-market currencies a breather. Barclays analysts have already said the rally may be due for a pause.
For ordinary Africans, the practical advice is unglamorous: expect volatility, watch fuel prices, and treat any currency relief as welcome but temporary until inflation and the Middle East both settle.
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