The shekel strengthened on Friday morning in inter-bank trading against the dollar but continued to weaken against the euro. The Bank of Israel set the shekel dollar representative rate down 0.232% from Thursday's rate at NIS 3.874/$, and the representative shekel-euro rate was set up 0.306%, at NIS 4.356/€.
The past week saw the shekel weaken by nearly 3% against the dollar to NIS 3.90/$ at one point yesterday before gaining back 0.75%. The shekel weakness is on the back of growth concerns after the Central Bureau of Statistics reported that GDP growth in Israel in the second quarter was a disappointing 0.3%.
However, the shekel continues to lose ground against the euro, which was boosted today by publication of the management procurement index for August for the euro-zone. The figure rose from 53.9 to 54.1. "This is one of the best figures for years in the euro-zone," noted Markit, the company that publishes the figure."
After the representative rate was sent the shekel weakened a further 0.38% against the euro to NIS 4.373/€. This means the shekel has lost 3.8% against the euro over the past week. But in after hours trading the shekel was firm against the dollar, falling 0.3% to NIS 3.874/$.
The Ministry of Finance Accountant General Michal Abadi-Boiangiu reported this morning conducting a number of hedging transactions over the past week on Israel's foreign debt. These included shekel-euro deals for the first time as well as shekel-dollar deals. Today alone the Ministry of Finance implemented a shekel-dollar hedging deal worth $60 million, while earlier in the week shekel-dollar deals worth $280 million and €100 million were carried out.
Bank Leumi (TASE: LUMI) analysts in their weekly macroeconomic survey said that the disappointing Israel growth figures increase the likelihood of the Bank of Israel intervening. "In our opinion, it is more likely that the Bank of Israel will implement monetary expansion than lowering the interest rate, which is already almost at zero. This measure would probably see the shekel continue to weaken against the dollar in the short term."
The biggest concern on the market is the problems of the Chinese economy with export figures down and the Shanghai Stock Market continuing to fall. This has dragged down markets around the world and put into question a possible rate hike by the US Fed next month.
Published by Globes [online], Israel business news - www.globes-online.com - on August 21, 2015
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