The shekel is firm today against the dollar and against the euro. In morning inter-bank trading, the shekel exchange rate is up 0.09% against the dollar at NIS 3.524/$ and up 0.06% against the euro at NIS 3.743/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.142% from Tuesday, at NIS 3.527/$, and the representative shekel-euro rate was set 0.594% higher at NIS 3.741/€.
The shekel is strengthening slightly against the dollar for the second successive day, after the Bank of Israel hiked the interest rate by 0.5% earlier this week to 3.75%, thus closing with interest gap rate with the US dollar, euro and sterling. However, most analysts believe that it is the US stock market and the hedging policies of Israel's institutional investors regarding their overseas positions that is the main motor driving the shekel-dollar exchange rate. When markets fall the shekel weakens and when markets gain the shekel strengthens.
Israel's investment houses tend to believe that during 2023 the shekel will strengthen gradually against the dollar perhaps even to around NIS 3.37/$ on average. The heart of the consensus is NIS 3.40-3.45/$ and Bank Leumi believes that the shekel will range between NIS 3.40-3.50/$ during 2023.
Bank Hapoalim chief strategist Modi Shafrir says, "On the one hand, continued structural forces support a strong shekel in the long term, on the other hand, the behavior of the markets will have an effect mainly in the short term. Regarding government's policy - if its measures lead to a substantial departure of foreign investors from Israel, this will lead to a weakening of the shekel. But in a scenario where Netanyahu moves forward on peace with Saudi Arabia (according to political reporters, the issue is a very high priority) - this will strengthen the structural factors that support a strong shekel."
Published by Globes, Israel business news - en.globes.co.il - on January 5, 2023.
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