The Tel Aviv Stock Exchange fell sharply this morning, in line with the trend on world markets, in response to the Russian invasion of Ukraine. The Tel Aviv 35 Index is currently down 2.18% at 1,941.85 points. Bank Leumi is down 2.48%; Bank Hapoalim is down 2.95%; and Nice Systems is down 5.30%.
Meanwhile the shekel has weakened considerably against the US dollar. The shekel-dollar rate is currently 1.19% higher than yesterday's representative rate, at NIS 3.2613/$. Against the euro, the rate is up 0.09%, at NIS 3.6565/€.
It looks as though the Bank of Israel could not have chosen a worse time to be hawkish, on the verge of the biggest shock in Europe for 70 years. The US dollar is strengthening worldwide in a rush for safety as Russia launches its invasion of Ukraine. Meanwhile, the price of oil has reached more than $100 a barrel for the first time since 2014.
"The official invasion of Ukraine by Russia has brought in train a rush to the dollar as a safe haven," says Prico Risk Management CEO Yossi Fraiman. "At the same time, the invasion is causing price rises in raw materials. The fear of further escalation that will lead to extensive involvement in Ukraine is affecting capital markets and may lead to postponement of moves planned to stop inflationary pressures.
"The sharp rise in fuel prices which is producing a domino effect on prices generally, from production to shipping, will, over time, alongside the rise in prices, also cause a decline in demand. The markets will view the event as a game changer that could cause a postponement of steps required on the part of central banks, and thus moderate the effect of the price rises on the capital markets.
"In our view, as we have said many times in the past few months, the shekel-dollar rate will strengthen and will even move towards NIS 3.3/$ in the first half of this year. Looking further ahead, however, the macro numbers of the Israeli market, the foreign investment, and export earnings, will lead to a renewal of the appreciating trend in the shekel."
Published by Globes, Israel business news - en.globes.co.il - on February 24, 2022.
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