Shekel gains despite rate cut expectations

Shekel  / Photo: Shutterstock

Despite disappointing growth, political uncertainty and an expected rate cut, demand for shekel is still outstripping demand for foreign currency.

The shekel is strengthening today against the dollar and against the euro. In afternoon inter-bank trading the shekel-dollar exchange rate is down 0.55% at NIS 3.519/$ and down 0.36% against the euro at NIS 3.96/€.

Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.028% today at NIS 3.538/$ from Tuesday's exchange rate, and set the shekel-euro rate down 0.304% at 3.930/€.

The shekel is strengthening today despite expectations that the Bank of Israel will cut the interest rate next month from 0.25% to 0.1%. Earlier this month, Bank of Israel Governor Prof. Amir Yaron said that the Monetary Committee decision to keep the rate unchanged at 0.25% was not unanimous and that when the minutes were published it would be seen that there are good reasons for already cutting the rate.

The shekel is stronger even though earlier this week the Central Bureau of Statistics cut its estimate for second quarter 2019 growth from an already poor 1% on an annualized basis to just 0.6%. This follows recent cuts in Israel's growth forecast for 2019 and 2020 by both the Bank of Israel and the International Monetary Fund (IMF).

And the shekel is stronger despite the political uncertainty. Prime Minister Benjamin Netanyahu has been unable to form a coalition following last month's elections and Blue & White leader Benny Gantz has been given a mandate to form a government but looks unlikely to succeed.

Despite everything, it seems that the overall strength of the Israeli market is causing demand for shekels to outstrip demand for foreign currency.

Published by Globes, Israel business news - en.globes.co.il - on October 24, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Shekel  / Photo: Shutterstock
Shekel / Photo: Shutterstock
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