The shekel is strengthening today against the dollar and against the euro. In afternoon inter-bank trading, the shekel-dollar exchange rate is down 0.44% against the dollar at NIS 3.535/$ and down 0.27% against the euro at 3.989/€.
On Friday, the Bank of Israel set the shekel-dollar representative rate up 0.113% at NIS 3.551/$, and set the shekel-euro rate up 0.065% at 4.000/€.
The shekel is trading at its strongest levels for 15 months against the dollar and below the key NIS 4/€. Leader Capital Markets macroeconomist Yonatan Katz said that despite plans by the US Federal Reserve to cut the interest rate this year, the Bank of Israel was very close last week to raising the rate above 0.25%. He also dismissed Bank of Israel Governor Prof. Amir Yaron's distancing himself from the Research Department's forecast of a rate hike this year and two more next year.
Katz said, "Many think that the macro forecast (the interest rate in particular) by the Research Department is completely cut off from the thinking of the Monetary Committee. To the best of our understanding, the reality is far more complex. The macro forecast is presented to the Monetary Committee one week before the decision for constructive comments and sometimes adjustments are made as required. In addition, some economists from the Research Department sit in on the initial discussions about the interest rate. The market was surprised that the forecast for a rate hike remains in the third quarter (in other words at the next meeting on August 28) but in fact even the Governor Amir Yaron hints it."
He added, "At this time, because of the slight rise in the inflationary environment, the robustness of the job market in particular and the economy in general and the stability of the exchange rate, it's possible that as part of the Committee's gradual and cautious plan, there will be a need to raise the interest rate at one of the upcoming meetings. Yaron is preparing the market for this possibility."
Published by Globes, Israel business news - en.globes.co.il - on July 15, 2019
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