Shekel below NIS 3.40/$ for first time since 2011

Karnit Flug

The Consumer Price Index figure for December published tomorrow could have an important impact on the Bank of Israel's interest rate plans and the shekel.

The shekel is strengthening against the dollar and weakening against the euro this afternoon. In futures contracts, the shekel-dollar exchange rate was down 0.74% from Friday's representative rate at NIS 3.3898/$, and up 0.52% against the euro at 4.1411/€. This is the first time that the shekel-dollar exchange rate has fallen below NIS 3.40/$ since July 2011.

On Friday, the Bank of Israel set the shekel-dollar representative rate down 0.234% from Thursday's exchange rate at NIS 3.4150/$ and set the shekel-euro rate up 0.178% at 4.1198/€.

Last week Bank of Israel Governor Karnit Flug told the "Globes" Business Conference in Jerusalem that the shekel is overvalued, in part because of speculators working with algorithms. She gave no indication whether she would bow to pressure from exports to purchase foreign currency to weaken the shekel. In December, for example, the Bank of Israel only purchased a modest $100 million worth of foreign currency.

The Bank of Israel left the interest rate unchanged at 0.1% last week and plans raising interest only in the second half of 2018 and only if inflation moved higher and towards to 1%-3% target range. With this in mind, tomorrow's Consumer Price Index (CPI) figure for December could have an important bearing on the Bank of Israel's plans and thus also impact the shekel.

Published by Globes [online], Israel business news - - on January 14, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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