The shekel is strengthening against the dollar and against the euro in afternoon inter-bank trading today. The shekel-dollar rate is down 0.28% against the dollar at NIS 3.192/$ and down 0.52% against the euro at NIS 3.701/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate unchanged, at NIS 3.211/$, and the representative shekel-euro rate was set 0.037% lower at NIS 3.737/€.
The shekel is trading below NIS 3.20/$ for the first time since January, when the Bank of Israel announced that it would by $30 billion in foreign currency this year to moderate the strengthening of the shekel. Despite already having purchased most of this amount, the shekel has strengthened by 2.5% against the dollar since the start of the year.
The rise in foreign stock exchanges have been partly responsible for the appreciation of the shekel with institutional bodies needing to buy foreign currency to hedge their overseas investments.
Prico Risk Management and Investments CEO Yossi Fraiman said, "Excessive surplus supply of foreign currency in the domestic market is pushing the appreciation of the shekel. Supply of foreign currency is due to foreign currency sales by importers and companies holding overseas offerings as well as the movement of foreign currency to Israel to invest in shekel bonds by foreign investors. All this joins the supply of foreign currency from Israeli institutional bodies.
"The rise in stock markets has left the institutional bodies exposed to major strengthening of foreign currency and investment managers are now seeking to reduce their exposure t foreign currency and selling significant amounts of foreign currency. The Bank of Israel has taken its foot off the pedal and has recently been purchasing much smaller amounts of foreign currency than in the past, with the bank having already realized its purchasing quota of $30 billion, which it declared in January.
"According to our estimates, and with the US Federal Reserve due to meet next week, the potential for the continued strengthening of the shekel is limited in the short term, and the Israeli currency may start weakening. But looking to the long term, there is no change in our estimates that the shekel is expected to strengthen in a significant way."
Published by Globes, Israel business news - en.globes.co.il - on October 27, 2021.
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