The shekel is again weakening today against the dollar and against the euro. In late morning inter-bank trading, the shekel-dollar exchange rate is up 0.54% against the dollar at NIS 3.617/$ and up 0.74% against the euro at 4.030/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.700% at NIS 3.598/$ from Monday, and set the shekel-euro rate up 0.615% at 4.012/€.
The shekel has weakened sharply after the Bank of Israel Monetary Committee decided on Monday to keep the interest rate unchanged at 0.25%.
Excellence Nessuah Investments chief economist Amir Kahanovich said, "The Bank of Israel made it clear that it sees the strengthening of the shekel as the main factor delaying the continued rise of inflation towards the middle of the target range. From this the market can estimate that the Bank of Israel might work against any significant strengthening of the shekel with various tools."
In keeping the interest rate unchanged, the Bank of Israel noted that the shekel had strengthened by 6% in nominal effective terms (a basket of the world's major currencies) since the start of 2019.
Kahanovich added, "It is our belief that if the Bank of Israel only talks and does not act, such as by cutting the interest rate, the strengthening of the shekel will resume, assuming that there are no new developments. The strengthening of the shekel by itself is not a negative occurrence and lowers the prices of goods and services imported into Israel such as those on international ecommerce sites. The concern is that the strengthening will stem from interest rates that are too high and won't help strengthen the economy and will begin at a certain stage to harm the ability of Israeli businesses to compete worldwide and layoffs will follow."
Published by Globes, Israel business news - en.globes.co.il - on May 22, 2019
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