The shekel is strengthening today against the dollar and stable against the euro after the US Federal Reserve yesterday hiked the interest rate by 0.25% to 4.75%-5%.. In afternoon inter-bank trading, the shekel-dollar rate is down 0.77%, at NIS 3.614/$, and the shekel-euro rate is down 0.07%, at NIS 3.93/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.219% from Tuesday, at NIS 3.642/$, and the representative shekel-euro rate was set 0.066% lower at NIS 3.933/€.
The shekel has been strengthening this week against the dollar after briefly touching on NIS 3.70/$ on Monday morning. This reflects the weakness of the dollar on world markets this week, which was reinforced yesterday by US Federal Reserve Chair Jerome Powell's tone implying that the round of rate hikes is about to end.
Swiss bank Lombard Odier said, "The Israeli shekel will cope with continuing depreciating pressures in the coming quarters, and we see the shekel-dollar exchange rate in the NIS 3.75/$ range in the coming 12 months. While Israel's external trade balance is positive, it might weaken in the future if the political uncertainty persists and result in a correction in the tech sector which will result in a reduction of foreign investment. These capital flows already showed signs of fading at the end of 2022, also due to the significant exports to the US which is 7% of Israel's GDP, a slowdown in the US economy in the second half of the year could weigh on exports. Meanwhile, a stronger recovery in Chinese growth will probably not make up for the situation. While Israel's exposure to China is notable (exports to China account for 4% of GDP), it is largely based on technological exports, which may be limited by the US (similar to the case of Taiwan )."
Published by Globes, Israel business news - en.globes.co.il - on March 23, 2023.
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