BoI Deputy Governor: Political uncertainty has hit shekel

Andrew Abir
Andrew Abir

As the shekel slides to its weakest since March 2020, Bank of Israel Deputy Governor Andrew Abir told "Bloomberg" that strong institutions are an important factor in long-term economic outlooks.

Deputy Governor of the Bank of Israel Andrew Abir has told "Bloomberg" that "political uncertainty" has affected the shekel exchange rate and equity markets but the Bank of Israel has yet to see any direct impact on capital flows. Abir added that strong institutions are an important factor in long-term economic outlooks though the turbulence may not change Israel's immediate prospects.

This afternoon the Bank of Israel set the shekel-dollar exchange rate up 2.414% at NIS 3.649/$ - the weakest the shekel has been against the US currency since March 2020 during the first lockdown in the Covid pandemic. The shekel-euro rate was set up 2.143% at NIS 3.889/€, and the shekel-sterling rate was set up 3.064% at NIS 4.417/£.

IBI chief economist Rafi Gozlan said, "There is no doubt that concerns about the harmful consequences to the judicial system that the government is pushing forward might be translated into an accelerated depreciation of the shekel exchange rate."

Furthermore, he stresses that the shekel depreciation is distancing Israel from reaching the inflationary target range and it also persuaded the Bank of Israel Monetary Committee to hike the interest rate yesterday by 0.5% instead of 0.25%.

Hachshara Insurance Company chief investment manager Roi Kadosh said, "In a world where interest rates rise we would expect the strengthening of the shekel but we see movement in the opposite direction.

He adds that another reason for the sharp depreciation of the shekel is concern for the independence of the Bank of Israel after, "Reports that we have already seen on foreign media outlets like Bloomberg in which Minister of Foreign Affairs Eli Cohen asked Minister of Finance Bezalel Smotrich to intervene in the independence of the Bank of Israel to halt the interest rate hikes. This has caused agitation."

Oppenheimer Israel CEO Harel Gillon said that the weakening of the Israeli currency stemmed from, "Negative sentiment towards the shekel and this sentiment is currently attracting short term players and speculators."

Published by Globes, Israel business news - - on February 21, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

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