The shekel is strengthening today against the dollar and against the euro. In early afternoon inter-bank trading, the shekel-dollar exchange rate is down 0.27% against the dollar at NIS 3.688/$ and down 0.36% against the euro at 4.188/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.163% at NIS 3.698/$ from Friday's rate and set the shekel-euro rate down 0.109% at 4.203/€.
The shekel is stronger today against the dollar even though the US currency has hit a three week high on international markets, after the IMF lowered global growth forecasts, leading investors to flee to safe haven currencies.
The shekel weakened considerably last weeks after the Central Bureau of Statistics reported that the Consumer Price Index for December was minus 0.3%, at the lower end of the analysts' predictions. This meant that inflation in 2018 was 0.8%, below the Bank of Israel's target range of between 1% and 3% annually. This puts into question the Bank of Israel's ability to raise interest rates later this year and thus close the interest rate gap between the shekel and the dollar.
After raising the interest rate from a historic low of 0.1% to 0.25% in December, the Bank of Israel has said that it plans another rate hike to 0.5% in the third quarter of 2019, followed by three more hikes in 2020 to 1.25%.
There was also good news for the Israeli economy last week, with the Central Bureau of Statistics revising upwards its GDP growth figure for the third quarter of 2018 from 2.1% to 2.3%, on an annualized basis.
Published by Globes, Israel business news - en.globes.co.il - on January 22, 2019
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