Shekel weakens after BoI rate call

Shekels Photo: Shutterstock Vladerina32
Shekels Photo: Shutterstock Vladerina32

Goldman Sachs: The Bank of Israel will be prepared to let the shekel strengthen while exports are not harmed.

The shekel is weakening against the dollar and against the euro today. In afternoon inter-bank trading, the shekel exchange rate is up 0.63% against the dollar at NIS 3.109/$ and up 0.47% against the euro at NIS 3.501/€.

Yesterday, the Bank of Israel set the representative shekel-dollar rate up 0.065% from Friday, at NIS 3.089/$, and the representative shekel-euro rate was set 0.312% lower at NIS 3.484.

Following the Bank of Israel's decision yesterday to leave the interest rate unchanged at 0.1% Goldman Sachs economists write that the Bank of Israel is likely to be more tolerant towards the strengthening of the shekel while Israel's exports are performing well. In its announcement yesterday, the Bank of Israel said that it has completed its plan to purchase $30 billion in foreign currency while stressing that this is not the upper limit and that it would continue to intervene in the foreign currency market, after taking into account the state of the market and economic activities.

"From our point of view," Goldman Sachs writes, "this indicates that the Bank of Israel will be prepared to let the shekel strengthen while exports are not harmed."

Goldman Sachs economists believe that the Bank of Israel will keep the interest rate low for a long period of time. "We don't see any rise in the interest rate before 2023 because in our estimates there is still room for recovery in the job market, inflation is expected to be low next year and the shekel may restrict the degree of monetary tightening by the Bank of Israel."

In contrast JP Morgan analysts see the Bank of Israel raising the interest rate by 28 basis points over the next 12 months with the rate hiked by 72 basis points over the next 24 months.

Published by Globes, Israel business news - en.globes.co.il - on November 23, 2021.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.

Shekels Photo: Shutterstock Vladerina32
Shekels Photo: Shutterstock Vladerina32
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