After yesterday's bombshell announcement by US President Donald Trump on US import tariffs, the forex market is volatile today. In afternoon inter-bank trading the shekel is strengthening against the US dollar and sharply weakening against the euro. The shekel-US dollar exchange rate is down 0.19% at NIS 3.702/$, and the shekel-euro rate is up 1.95%, at NIS 4.093/€. The shekel is at its weakest against the euro in five months.
Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.162% from Tuesday, at NIS 3.699/$, and the representative shekel-euro rate was set 0.08% lower at NIS 3.992/€.
Why has the shekel weakened sharply against the euro?
The euro is reacting with a sharp gain against the Israeli currency. The reason for this is the effects of the various exchange rate changes. The shekel is not traded directly against the euro, but is converted at the dollar-shekel rate and then at the dollar-euro rate. Thus, when the dollar depreciates sharply against the EU currency. Israel also sees the effects of the devaluation. In fact, the biggest beneficiary of the global mess is the euro. The euro-dollar rate reached $1.09 per euro, the dollar's lowest since October. "Reuters" noted that the euro is strengthening because it seems that Europe is looking more inward, "Europeans continue to examine how to stabilize the economy and continue growth and are not dealing with reciprocal tariffs. The market likes the calm and settled approach on the continent."
Looking ahead
The question that now arises is what will happen after the global storm calms down, and how the heavy tariffs will affect the global economy. Bank Hapoalim chief financial markets strategist Modi Shafrir notes that much depends on future developments. "There is a fear that Europe and other countries will impose reciprocal tariffs on the US. In contrast, countries like Israel will likely reduce their taxes on the US." Shafrir stresses that the current situation is not healthy for the global economy and is increasing levels of uncertainty in the world. In the meantime, investors are fleeing to safer investments. Gold is trading at record levels at more than $3,100 per ounce. Also, in the past 24 hours, government bond yields have fallen sharply, while investors are turning to risk-free assets.
Published by Globes, Israel business news - en.globes.co.il - on April 4, 2025.
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