Shekel stronger in volatile trading

The shekel has been stronger today against the world's major currencies in volatile trading. The Israeli currency appreciated strongly this morning but gave up much of the gains, after today's representative rate was set, on US reports that Israel might retaliate today for Iran's attack.

This afternoon the Bank of Israel set the shekel-dollar exchange rate down 1.091% at NIS 3.716/$ and set the shekel-euro rate 1.249% lower at NIS 3.962/€. In late afternoon inter-bank trading the shekel gave up most of these gains with the shekel-dollar rate over 1% higher at NIS 3.755/$ and the shekel-euro rate 0.7% higher at NIS 3.991/€.

Bank Leumi head of markets strategy Kobby Levi said, "The shekel strengthened this morning against the basket of major currencies. The appreciation was particularly expressed against the euro which feel below the NIS 4.00/€ threshold. The liquidity environment is good, and the supply of foreign exchange is due to the decrease in the level of concern of an escalation in the region. However, the events of the weekend significantly increase tensions in the Middle East, and indicate that the conflict has expanded and is not expected to end soon. In our estimation, the uncertainty and volatility in the financial markets is expected to continue, and not only in Israel, because of the sensitivity of the oil price to tensions in the Persian Gulf region and the Middle East and the potential for security escalation in the conflict with Iran.

"Over the past two weeks, shekel trading has been sharply volatile against the dollar. During the past week, its value fluctuated between NIS 3.68-3.76/$. On the other hand, against other foreign currencies, the volatility has been more moderate and there has even been a certain increase in the value of the shekel. For example, against the euro, the shekel maintained its value around NIS 3.98-4.02/€, and strengthened at the beginning of this week."

"The volatility of the shekel has been due to the volatility of the US dollar on world markets, the publication of the Bank of Israel's interest rate decision, the interest rate protocol, US inflation data, the interest rate decision in Europe and the escalation in geopolitical tensions. The short shekel yield rose sharply, and the one-year dollar yield rose less than the shekel. As a result, the yield gap (for a period of one year in the derivatives market) has been considerably reduced to about 85 basis points in favor of the dollar."

Published by Globes, Israel business news - en.globes.co.il - on April 15, 2024.