May 2024 FX outlook: A stronger dollar exerts pressure on African currencies

The persistent dollar appreciation, driven by sustained higher interest rates in the United States of America (US) over the past few weeks, is exerting pressure on the currencies of key economies in Sub-Saharan Africa. The Federal Reserve's stance to keep interest rates higher for longer has caused a rise in US treasury bill yields, luring investors and translating directly to the dollar’s appreciation, affecting the value of other currencies.

The Nigerian naira and Kenyan shilling, which had experienced steady gains of 49.9% and 5.1%, respectively, between March 14 and April 16, 2024, began to falter from April 17, 2024, shedding 19.9% and 1.8% of their previous gains by April 26, 2024. Concurrently, the Ghanaian cedi continued its depreciating trend, having lost 9.1% year-to-date, while the South African rand, whose movements have been volatile, depreciated by 0.7% since April 17, 2024. However, the Egyptian pound, which shed 2.6% between March 25,