The shekel is strengthening sharply against the dollar and against the euro today. In afternoon inter-bank trading, the shekel-dollar rate is 1.48% lower at NIS 3.782/$, and the shekel-euro rate is 1.16% lower at NIS 4.049/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.027% from Monday, at NIS 3.771/$, and the representative shekel-euro rate was set 0.205% lower at NIS 4.096/€.
Domestic and global developments are strengthening the shekel
Bank Hapoalim chief financial markets strategist Modi Shafrir tells "Globes" that the major influence on the forex market today comes from abroad. "World stock markets and especially the US have strengthened significantly over the past two weeks, and futures contracts indicate further rises today. Institutional investors are concerting foreign currency as a result of the market gains due to their exposure to foreign currency on their investment portfolios reaching record levels over the past year and in order to avoid a further increase they are selling dollars with the foreign markets rising and this is strengthening the (Israeli) currency."
Mizrahi Tefahot Bank chief markets economist Ronen Menachem explains, "The strengthening of the shekel also stems from the weakness of the dollar on world markets. Against the euro, the dollar has weakened to $1.09/€, while awaiting the interest rate in Europe, which will be announced on Thursday. This is the lowest level this month. Recently, more hawks have been heard in the Eurozone regarding interest rates than in the US, so the dollar tends to weaken."
The DXY index, which measures the performance of the dollar in the world, has fallen slightly in the last few days after a sharp increase last week.
Shafrir cites an additional reason relating to the local market. "Last night developments in negotiations on a hostage deal and ceasefire were published in the foreign media, contributing to optimism on the markets."
Despite the sharp increase in the value of the shekel against foreign currencies, the economic environment contains a lot of uncertainty. The upcoming interest rate decisions by both the US Federal Reserve and the European Central Bank will provide clarity regarding the future interest rate outline in the US and the Eurozone and are expected to affect the foreign exchange market. Also, the uncertainty in Israel continues to affect the markets and negative developments in the south or escalation in the north will weigh on the shekel.
Published by Globes, Israel business news - en.globes.co.il - on January 24, 2024.
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