Shekel gains continue after BoI rate call

Shekel Photo: ASAP Creative

Leader Capital Markets: We expect the Bank of Israel to continue intervening in the foreign currency market to slow but not halt the shekel's appreciation.

The shekel is strengthening today against the dollar and against the euro. In late morning inter-bank trading, the shekel-dollar exchange rate was down 0.36% at NIS 3.241/$ and the shekel-euro rate was down 0.17% at NIS 3.962/€.

On the foreign exchange market, the Bank of Israel did not set a new rate yesterday because of public holidays in the US and Europe. On Friday, the Bank of Israel set the representative shekel-dollar rate up 0.154%, at NIS 3.253/$, and the representative shekel-euro rate was set 0.146% higher, at NIS 3.969/€.

The shekel continues to trade at its strongest against the dollar since mid-January. Yesterday, as expected, the Bank of Israel's Monetary Committee announced that the interest rate for June will remain unchanged at its historic low of 0.1%. Market sources do not expect the rate to rise until at least the second half of 2022. Leader Capital Markets chief economist Yonatan Katz said, "The Bank of Israel did not change the interest rate but the announcement exuded more optimism regarding the development of the economy and economic recovery. The impact of the security escalation was limited and the first quarter 6.5% GDP contraction was due to car imports and public expenditure. The process of returning to routine in Israel supports rapid growth in the coming year. However, there are still challenges to activity due to the health risks in Israel and abroad and the damage to the economy and in particular the job market."

Katz added, "At the last decision there was more concern about the job market and the damage to the economy and job market was expacted to be more protracted."

"We think that the Bank of Israel is not expected to increase its bond purchasing program when it ends. Intervention in the foreign currency market will continue with the aim of slowing but not halting the trend of (shekel) appreciation."

Published by Globes, Israel business news - en.globes.co.il - on June 1, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
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