The US dollar hit a four-year low in January, losing 9% of its value over the year. Incumbent President Trump publicly welcomes this situation, arguing that a weaker currency boosts exports and makes US goods more competitive globally.
The dollar's weakening comes amid unprecedented pressure from the Trump administration on the Federal Reserve: the president demanded lower rates and criticized Fed Chairman Jerome Powell. This affected trust in the Fed's independence.
In January, Trump nominated Kevin Orsh as the next Fed Chair, signaling a shift in monetary policy. Orsh had long opposed low interest rates but recently supported rate cuts, raising questions about his independence and potential influence on policy.
A weak dollar means higher prices for imports and rising inflation, affecting ordinary Americans. Simultaneously, Orsh supports shrinking the Fed’s balance sheet, which typically raises credit costs and complicates business borrowing.
For Ukraine, the situation is paradoxical: the dollar is falling globally but rising against the hryvnia due to the National Bank’s policy and the budgeted exchange rate. A hryvnia depreciation of up to 10% is forecasted to maintain its investment appeal.
The Fed’s independence under Trump’s political pressure is a key issue this year. Decisions about its autonomy will affect not just the dollar’s exchange rate but also global trust in the US financial system.
