The shekel is continuing to weaken sharply against the world's major currencies as tensions rise along Israel's northern border. In volatile forex trading, the shekel has lost more than 2% against the US dollar and euro so far this week.
In late morning inter-bank trading, the shekel is 1.20% higher against the dollar at NIS 3.651/$ and 1.07% higher against the euro at NIS 3.99/€. Yesterday, the Bank of Israel set the representative shekel-dollar rate up 0.838% from Friday, at NIS 3.608/$, and the representative shekel-euro rate was set 0.905% higher at NIS 3.948/€.
Mizrahi Tefahot Bank chief economist Ronen Menachem tells "Globes" that the reason for the shekel's depreciation is, "The high sensitivity to the forex market to another security escalation on the northern front, with both sides intensifying their activities."
Menachem recalls that prior to the depreciation of the past few days, the shekel had been strengthening due to positive data about the improved performance of the Israeli economy. "The state budget figures pointed to encouraging resilience on revenue and the Bank of Israel's decision not to cut the interest rate last month."
"We are talking about speculative activities by foreign banks"
On the other hand, Energy Finance and Risk Management general manager Yossi Frank says that we are talking about speculative activities by foreign banks. "The Bank of Israel is out of the game as we have seen from the data published and it has stopped selling dollars to stabilize the market. And now most of the trading is conducted by foreign banks, so that is to say there is fertile ground for speculation in order to try and profit from the uncertainty in Israel."
In Frank's opinion, since January, "There is major volatility on the market but there is no substantial change in the factors for a change in the value of the currency." The forecasts of banks in Israel and around the world is for a future strengthening of the shekel against the dollar. Frank explains that the market is trying to analyze what is going on in Israel looking ahead. "The depreciation so far began with the judicial reform, and that will probably not come back onto the agenda, and moreover, we see the war in Gaza ending in Israel's favor, which in the future is expected to strengthen the Israeli shekel." Frank adds that, however, a significant escalation on the northern front would lead to the currency losing ground.
Menachem explains that looking ahead it can be assumed that forex market volatility will continue. He says, "It must be taken into account that the Bank of Israel is monitoring what is happening and at any point in time that it thinks it is an excessive depreciation of the shekel, which is not justified by economic data, it has a plan to sell foreign exchange reserves, as it announced in the first week of the war."
Published by Globes, Israel business news - en.globes.co.il - on March 12, 2024.
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