Fed Chair remarks stoke strong shekel gains

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative

Hints by US Fed Chair Jerome Powell about a rate cut have pushed the shekel to its strongest against the dollar since April 2018.

The shekel is strengthening today against the dollar and against the euro as it is becoming clear that the US Federal Reserve will soon cut the interest rate, possibly even this month. In morning inter-bank trading, the shekel-dollar exchange rate is down 0.82% against the dollar at NIS 3.544/$, its lowest rate in 15 months, and down 0.33% against the euro at 3.996/€.

Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.140% from Tuesday at NIS 3.573/$, and set the shekel-euro rate up 0.305% at 4.009/€.

In delivering his semi-annual monetary policy report to Congress's House Financial Services Committee in Washington DC yesterday, US Federal Reserve Chair Jerome Powell stressed weakness and uncertainties in the US and global economies. He strongly hinted that the Fed is set to cut interest rates for the first time in a decade, possibly even this month.

He said, “It appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook. Uncertainties about the outlook have increased in recent months. A number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and Brexit."

US commentators have suggested that Powell is simply saying what President Trump wants to hear. Trump has been putting the Fed under enormous pressure to cut interest rates and some feel that Powell is bowing to that pressure.

In addition to the weakness that Powell's comments have caused the dollar, the shekel is strong in its own right and has also pushed the euro below the psychologically important NIS 4/€ threshold. The shekel is strong after the Bank of Israel Research Department earlier this week reiterated its forecast of a rate hike this year and two more rate hikes next year. This has boosted the shekel even though Bank of Israel Governor Prof. Amir Yaron distanced himself from the forecast by stressing that it is not the forecast of the Monetary Committee, which takes the actual interest rate decision.

Published by Globes, Israel business news - en.globes.co.il - on July 11, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
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