Shekel weakens sharply as BoI buys foreign currency

The shekel is weakening sharply against the dollar and against the euro. In afternoon inter-bank trading, the shekel-dollar exchange rate was up 0.94% from yesterday's representative rate at NIS 3.855/$, and up 1.17% against the euro at NIS 4.034/€.

The Bank of Israel reportedly intervened in foreign currency trading this morning and bought an estimated $300 million in foreign currency, thus weakening the shekel.

On Friday, the Bank of Israel set the shekel-dollar representative rate up 0.052% compared with Thursday's rate at NIS 3.819/$, and the representative shekel-euro rate was set down 0.050% at NIS 3.987/€. No representative rate was set yesterday due to the holidays on foreign exchange markets worldwide.

Yesterday, the Bank of Israel Monetary Committee kept the interest rate at its historic low of 0.1%, as expected. The Bank of Israel's Research Department estimates that the interest rate will rise to 0.25% only during the fourth quarter of 2017 and to 0.5% in the second half of 2018.

On the strength of the shekel, the Bank of Israel observed, "From the monetary policy discussion on November 27, 2016, through December 23, 2016, the shekel strengthened by 1.3% against the dollar, and appreciated by 2% in terms of the nominal effective exchange rate. The shekel has appreciated by 5.6% over the past 12 months in terms of the nominal effective exchange rate, against the background of appreciation of 6.3% vis-à-vis the euro. The level of the effective exchange rate continues to weigh on the growth of exports and of the tradable sector."

Commenting on the Bank of Israel's rate decision and other comments FXCM Israel said this morning, "While the Bank of Israel supported the shekel by raising the growth forecast, it does not see a rate rise until the fourth quarter of 2017, while the US Fed expects three rate rises in 2017, so the interest gap between the dollar and the shekel should widen in 2017. At least from a monetary point of view, this supports the strengthening of the dollar against the shekel in 2017."

Published by Globes [online], Israel business news - www.globes-online.com - on December 27, 2016

Shekel weakens sharply as BoI buys foreign currency

The Bank of Israel said that it sees no rate increase until the last quarter of 2017.