The shekel is at its weakest for almost three years against the US dollar. The current rate on the foreign exchange market is NIS 3.6107/$, 1.34% higher than yesterday’s representative rate. This is the first time that the rate has risen above NIS 3.6/$ since April 2020. Against the euro, the rate is NIS 3.8514/$, 1.17% higher than yesterday’s representative rate.
"There is no change in our view that if the shekel-dollar rate consolidates above NIS 3.6/$, this could be a sign of significant developments beneath the surface," says Prico Group CEO Yossi Fraiman. "Investors and technology companies are transferring money out of Israel. Depreciation of the shekel will further fuel inflation and entail another interest rate hike by the Bank of Israel in its next decision on April 3.
"The rise in dollar interest rates expected in the wake of the inflation trend and the tight labor market could cause a decline on the stock market, which will lead to demand for foreign exchange against the shekel on the part of the financial institutions. This will create even greater surplus demand, and further depreciation of the shekel. Unless there is agreement on the key issues, particularly issues connected to the independence of the courts and preservation of a mechanism of separation of powers, the shekel-dollar rate, if it breaks through the NIS 3.7/$ level, could swiftly move towards NIS 4/$ and higher," Fraiman adds.
Talking to "Globes" yesterday, Governor of the Bank of Israel Amir Yaron said, "The shekel has undergone many fluctuations in the last three months. We have seen it touch NIS 3.35/$ and recently it has hovered around NIS 3.55/$. At the same time, we have seen recently that the close connection between the shekel exchange rate and stock market performance has weakened. However, the changes have occurred over a very short period of time, so it is difficult to point to a clear trend, but the uncertainty for sure does not help the strengthening of the currency. It is clear that if the other parameters are kept constant (which define the level of inflation) and there is a depreciation of the currency, it does not help to eliminate inflation."
Published by Globes, Israel business news - en.globes.co.il - on February 21, 2023.
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