Financial experts predict gradual decline for US Dollar in next 6-12 Months
This signals a potential turning point for emerging economies, long pressured by a strong greenback.
Financial market experts are predicting a gradual decline in the value of the US dollar, the global trading currency benchmark, over the next six to 12 months.
This signals a potential turning point for emerging economies, long pressured by a strong greenback.
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According to Standard Chartered Bank’s H2 Global Market Outlook, the shifting global economic dynamics promise to reduce the dollar's dominance over local currencies in emerging countries.
It highlights that growth in the United States continues to be supported by resilient consumption and fiscal stimulus, though trade and policy uncertainty may temper momentum during the second half.
Against this backdrop, the lender outlines an investment strategy reflecting evolving risks and opportunities.
“We expect a weaker USD in the next six-12 months, with risks tilted to the downside,” the report reads.
In Kenya, where a strong dollar has contributed to currency depreciation, rising debt servicing costs, and more expensive imports, the projected softening of the greenback could bring much-needed relief.
Ideally, when the local currency strengthens, it's often good news for the country in various aspects.
A strengthening shilling means relief to consumers, as a reduced burden of importation cost consequently trickles down to them, prompting a decrease in the general cost of living.
Illustratively, if the Shilling strengthens by about 20 per cent against the US dollar year-on-year, importers would spend Sh20 less on every shilling used to buy a dollar for imports.
A strong shilling is also expected to boost the country’s forex reserves as importers strive for the much-needed dollar for imports.
Nevertheless, a strong shilling against the greenback is expected to cut down debt burden pressure since most of it is dollar-denominated.
However, in the remittance case, it is a disadvantage, despite the crucial role the diaspora inflows play in the country’s economy.
WorldRemit research shows Kenya is one of the continent's top recipients of remittances, with the country's primary uses being household needs, healthcare and education.
Additionally, a weakening dollar presents an advantageous opportunity for emerging market investors to capitalise on new prospects.
StanChart in the report says a weaker dollar historically supports returns across risk assets, particularly in emerging markets, which have long been core components of regional portfolios.
Speaking on Thursday during a media brief, StanChart’s chief investment officer of Africa, Middle East and Europe, Manpreet Gill, said the weakening dollar outlook underscores a critical moment for investors in the region.
“As the global environment adjusts to weak dollar dynamics, shifting trade policies, and diverging central bank actions, investors in the emerging markets have an opportunity to reposition portfolios with greater international diversification,” Gill said.
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