The shekel is weakening today against the dollar and against the euro. In afternoon inter-bank trading, the shekel-dollar rate is up 0.52%, at NIS 3.639/$, and the shekel-euro rate is up 1.15%, at NIS 4.016/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate 0.028% up from Monday, at NIS 3.62/$, and the representative shekel-euro rate was set 0.334% lower at NIS 3.971/€.
The shekel is depreciating ahead of the US Federal Reserve interest rate announcement tonight with most economists expecting another 0.25% hike to 5%-5.25%. The Bank of Israel's next interest rate decision is on May 22, with most economists expecting a 0.25% hike, the tenth consecutive hike over the past year to 4.75%.
Prico Group CEO Yossi Fraiman said, "Concern about the collapse of regional banks in the US cause the banking and finance to fall and contributed to weakness on the US stock markets yesterday. This supported demand for foreign currency and the depreciation of the shekel. There is no change in our estimation that the supply of foreign currency from exporters needing to pay salaries and taxes will support the shekel, which may return to strengthen in the short term to NIS 3.61/$ or even lower."
"Today's expected interest rate decision in the US, which will probably see a 0.25% hike, along with the consequences of the judicial reform, continue to support the potential for the devaluation of the shekel in the medium term towards the 3.7/$ level or higher.
"The belief that rating agency S&P will also present a downgrade of Israel's credit rating outlook, along with weak macro data, erosion of the state's tax revenues and the apparent damage to the tech sector, are all expected to support demand for foreign exchange and the depreciation of the shekel. Without canceling and removing from the agenda the issues of judicial reform, foreign investors may reduce their activity in the local arena and thus significantly reduce the scope of the foreign exchange supply and the demand for workers in the high-tech industries."
Published by Globes, Israel business news - en.globes.co.il - on May 3, 2023.
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