After a month in which the shekel has been depreciating, the Israeli currency is bouncing back today. In late morning volatile inter-bank trading, the shekel-dollar rate is down 1.26%, at NIS 3.617/$, and the shekel-euro rate is down 1.53%, at NIS 3.835/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate up 0.384% from Tuesday, at NIS 3.663/$, and the representative shekel-euro rate was set up 0.152% at NIS 3.895/€. The shekel was at its weakest against the dollar in three years and had lost more than 8% against the US currency since the start of February.
The reason for the shekel rebound, which began late yesterday afternoon, remains unclear and market sources have denied rumors that the Bank of Israel had intervened on the forex market to buy shekels and help strengthen the Israeli currency.
Yesterday an emergency session of the Financial Stability Committee convened to focus on the weakening of the shekel, and warnings by economists and the international ratings agencies that the government's judicial reforms could adversely affect Israel's economy. Members of the committee include the Governor of the Bank of Israel, Supervisor of Banks, and Head of Payment Systems, Ministry of Finance director general and accountant general and the chairman of the Israel Securities Authority.
A weaker shekel weighs on the Israeli economy and makes imports more expensive, hitting Israelis in the pocket and further fueling inflation. From a broader perspective, a strong rise in the dollar exchange rate will increase Israel's national debt by billions of shekels. As reported by "Globes", most of Israel's debt is in shekels, but 25% of it is foreign currency, which greatly swells the debt.
Over the past few days, Citi analysts have gone short on the shekel, predicting a NIS 3.95/$ rate, while Bank of America says it is also bearish on the Israeli currency because of "the political noise" in the country.
Published by Globes, Israel business news - en.globes.co.il - on February 23, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.