The shekel is weakening sharply today against the US dollar and against the euro on concerns of war in the north after Hezbollah rocket killed 12 children in Majdal Shams on Saturday. In afternoon inter-bank trading, the shekel is 1.59% higher against the dollar at NIS 3.739/$ and 1.50% higher against the euro at 4.053/€.
On Friday, the Bank of Israel set the representative shekel-dollar rate up 0.739% on Friday, at NIS 3.680/$, and the representative shekel-euro rate was set 0.721% higher at NIS 3.993/€.
Bank Leumi head of markets strategy Kobby Levi tells "Globes" that over the past week, the past week, "There was a deterioration in local sentiment, compared with the optimism that there was in the market in the two weeks prior to that. This, follows the grave attack on Majdal Shams and the increased fear of a backlash, the prolongation of the negotiations on the hostage deal and the cancelation of the Wiz deal." Levi believes that the effects will lead to continued depreciation of the shekel.
Levi explains that the situation in the north "Increases the concerns, uncertainty and volatility of the markets. The volatility in the main scenario will lead to continued fluctuations in the dollar-shekel exchange rate between NIS 3.6/$ and NIS 3.8/$, as we have seen over the last eight months."
Prico Risk Management, Finance and Investments CEO Yossi Fraiman tells "Globes" "After the initial shock, the depreciation potential depends on the nature of the Israeli response and its consequences, with the market taking advantage of the depreciation for foreign exchange conversions."
Levi still believes in the strength of the shekel. "The data on trade and the export of services indicate a continued surplus in the current account, and the data on financial activity indicate that for now, the outflow of foreign investments is mainly due to temporary factors, and does not indicate a fundamental change in the market. Thus, looking to the future, in the long term, and after the negative sentiment has passed, it is possible to expect the Israeli currency to appreciate."
Regarding the effect of the declines in the US on the Israeli foreign exchange market, Levi is convinced that, unlike in the past, no unusual reaction is expected. "The institutional entities have increased their liquidity balances and their rate of exposure to foreign exchange in the 18 months, and therefore the inverse relationship between the markets and the shekel has weakened," says Levi, adding that to see a change in situation, a more significant rate of declines on Wall Street is needed.
Fraiman notes that adds that at the beginning of August, we see the activity of Israeli exporters in the forex market: "The exporters will contribute to the supply of currency in the market and reduce the pressure of depreciation on the shekel."
Published by Globes, Israel business news - en.globes.co.il - on July 29, 2024.
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