The shekel is strengthening today against the dollar and against the euro. In late morning inter-bank trading, the shekel exchange rate is down 0.60% against the dollar at NIS 3.243/$ and down 0.15% against the euro at NIS 3.582/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.730% from Tuesday, at NIS 3.263/$, and the representative shekel-euro rate was set 0.665% lower at NIS 3.587/€.
The shekel is stronger today even though the US Federal Reserve raised US interest rates yesterday for the first time since 2018. The Fed increased the rate by 0.25% and indicated that there could be six more rate hikes this year up to 1.9% by the end of 2022.
The move strengthened the dollar against most major currencies but not against the shekel. In all likelihood the Bank of Israel will raise interest rates from its historic low of 0.1% next month having indicated last month that it would gradually start increasing rates.
The reason for the shekel's continued strengthening is the rise in the US stock market, which compels Israeli institutional investors to buy shekels to hedge their overseas positions.
It is unusual for stock markets to surge after a Fed rate hike but investors have been boosted by encouraging signs that Russia and Ukraine are moving towards a peace agreement and belief that the Fed is taking firm action to combat inflation.
Published by Globes, Israel business news - en.globes.co.il - on March 17, 2022.
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