Despite Israel remaining tense following Iran’s pledge to avenge the assassination of Hamas political leader Ismail Haniyeh in Tehran last week, the shekel has been gaining sharply today. Today’s gains end a week of the shekel's depreciation, which saw the Israeli currency trading at its weakest against the US dollar since November 2023.
This afternoon, the Bank of Israel set the representative shekel-US dollar exchange rate down 1.535%, in comparison with Tuesday’s representative rate, at NIS 3.784/$, and the shekel-euro rate was set 1.403% lower, at NIS 4.133/€.
Energy Finance CEO Yossi Frank explained that the shekel was strengthening today for two reasons, "The understanding in the markets that the Iranian response will probably not be powerful," and thus the level of concern among investors decreases. "In addition, yesterday's exchange rate increases now result in quick profit taking."
Frank adds that the strengthening of the shekel also stems from the understanding that the Bank of Israel is closely scrutinizing the functioning of the foreign exchange market. He said, "The market understands that the bank will wake up and intervene."
So far the Bank of Israel has only sold about $8.5 billion from its foreign currency reserves to support the shekel and has not intervened since November. Frank predicts that when the war ends, the shekel will strengthen to NIS 3.4-3.5/$. "These are its normal levels, and this is the threshold we will reach when the market realizes that the war is over."
Published by Globes, Israel business news - en.globes.co.il - on August 7, 2024.
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