Over the past 12 months, the United States dollar has weakened significantly, with the dollar index falling by 8-9 percent against a basket of major currencies, its largest annual drop since 2017. THE weakness continued into early 2026, with the greenback hitting four-year lows against major currencies amid investor uncertainty and geopolitical tensions. The depreciation was mainly driven by the impact of tariff announcements and increased economic uncertainty; expectations of new Federal Reserve chairperson interest rate reduction (owing to Trump pressure); and slowing US growth prospects.
The US dollar depreciation has also contributed to a gold rally, with gold spot prices surging above US$5 000 per ounce, though recently highly volatile. The impact of the US dollar depreciation has multi-layered implications on the Zimbabwean economy, particularly because Zimbabwe is a highly dollarised economy. If Zimbabwe had the dominance of its local currency (as in South Africa or Botswana), the depreciation of the US dollar would lead to appreciation of the local currency, lower imported inflation and easing domestic inflationary pressures.
The appreciated local currency would ordinarily have attrition on exports, while increasing imports, thus worsening the trade and current account balance. In the case of Zimbabwe, because of the US dollar dominance — the greenback accounts for over 80 percent of economic activity in Zimbabwe — the implications of US dollar depreciation are on multiple levels, as summarised below:
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