The shekel is continuing to depreciate at an alarming rate. In late morning inter-bank trading the shekel-dollar rate is up 1.47% at 3.726/$ and the shekel-euro rate is up 1.52% at 4.018/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate up 0.575% from Monday, at NIS 3.672/$, and the representative shekel-euro rate was set 0.129% higher at NIS 3.958/€.
The shekel has continued to weaken even after the government passed the 2023-2024 budget this morning. Yesterday the shekel weakened after IDF Chief of Staff Lt. Gen. Herzi Halevi told the Herzliya Conference that there were negative developments in Iran that could prompt IDF actions.
Psagot chief economist Ori Greenfeld explains the plunge in the shekel today as, "Increased uncertainty due to the Chief of Staff's remarks and the approval of the budget, which puts the issue of the judicial overhaul back on the table. In the market, when uncertainty increases, this is reflected in the risk premium, as we see now in the shekel-dollar exchange rate. As certainty returns, it is likely that the dollar-shekel exchange rate will moderate as well. In the forex market the name of the game is sentiment, and that is what we are seeing now."
The shekel is currently at its weakest against the US dollar since March 2020. Mizrahi Tefahot Bank chief markets economist Ronen Menachem said that in the short term the performance of the shekel is very dependent on political and security comments. "That is why we see such a jump in the exchange rate following remarks by the IDF chief of staff."
Published by Globes, Israel business news - en.globes.co.il - on May 24, 2023.
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