Confidence in the US dollar as a safe haven against economic shocks has decreased to a three-year low as the sell-off of the currency gained momentum on Monday following the long Easter break.
According to the Bloomberg Dollar Spot Index, the dollar fell as much as one per cent (1%) on Monday, as investor confidence in the greenback slumps.
The dollar dropped to its lowest level since March 2022, sparking fresh fears of global recession. The currency that is often seen as the global reserve currency is quickly ceding ground following President Donald Trump’s return to the White House in January.
Confidence is tanking, especially after Trump announced he will act upon his threat of dismissing the US Federal Reserve Chairman Jerome Powell.
Although scholars indicate this is improbable, Trump has remained resolute, which has added to the pressures facing the dollar. He called the Fed Chair “Mr Too Late” and “a major loser” in a post on Truth Social.
While the US dollar seems to be losing ground, the Japanese yen strengthened to a level last seen in September, while the euro rallied to the highest in more than three years.
This means that at the opening of Kenya’s markets on Tuesday, the investors will be facing a very different market from that which closed on Thursday.
Investors may now consider whether to retain their US dollar holdings or shift into the Kenyan shilling ahead of projections that the currency could weaken to between Ksh135 and Ksh150 by end‑2025, depending on US monetary policy and import demand dynamics.
Experts say it is difficult for Trump to remove Powell, but that has not stopped investors from selling off their dollars.
“Should the US fall into a recession with a central bank that either does not or cannot act independently, there’s a chance such a downturn could be exacerbated, giving markets even more reason for concern,” said Monex foreign-exchange trader Helen Given to Bloomberg.
Another expert told CNBC that the market are all but reacting to every decision Trump signals.
“We’re seeing a clear signal from the market that it doesn’t like even the idea that the president might try to remove the Fed chair. There has been some loss of confidence in US economic policymaking in recent weeks,” Krishna Guha, vice chairman at Evercore ISI, said.
The Kenyan shilling, which has remained below Ksh130 for over eight months now, will be one to watch.
Equally, keep an eye on fuel imports, which are often affected by the pressures on the dollar.
