The shekel has again been weakening sharply today against the dollar. In afternoon inter-bank trading, the shekel exchange rate is up 1.39% against the dollar at NIS 3.498/$ and up 0.12% against the euro at NIS 3.637/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate up 0.407% at NIS 3.450$, and the representative shekel-euro rate was set 0.060% lower at NIS 3.633/€.
The shekel is hovering near the NIS 3.50/$ threshold for the first time since May 2020 as stock markets worldwide end the second quarter and first half of 2022 with heavy losses. This forces Israeli institutional investors to hedge their overseas pension fund investments by buying foreign currency and selling shekels.
Next week the Bank of Israel is expected to raise the interest rate by 0.5% to 1.25%. But with the US Federal Reserve expected to raise the rate by 0.75% in July for the second successive month, the interest gap rate between the shekel and dollar is widening, thus further weakening the Israeli currency.
With gasoline prices rising above NIS 8 per liter tonight, Israel's annual inflation rate of 4.1% is expected to rise to 5% in the coming months, although this is still well below the OECD average.
Published by Globes, Israel business news - en.globes.co.il - on June 30, 2022.
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