Shekel weakens against dollar after Fed rate hike

Shekels Credit: Shutterstock Vladerina32
Shekels Credit: Shutterstock Vladerina32

The Israeli currency seems to have been more influenced by the sharp gains in stock prices on Wall Street.

The shekel is weakening today against the dollar and stable against the euro. In afternoon inter-bank trading, the shekel exchange rate is up 0.29% against the dollar at NIS 3.437/$ and up 0.07% against the euro at NIS 3.480/€.

Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.522% from Tuesday, at NIS 3.427/$, and the representative shekel-euro rate was set 0.327% lower at NIS 3.478/€.

The shekel is weakening against the dollar today, after the US Federal Reserve raised the interest rate yesterday by 0.75%. This was the fourth Fed rate hike of the year, and the second successive 0.75% hike, bringing American rates to between 2.25% and 2.5%. This is double Israel's rate of 1.25%, despite three rate hikes by the Bank of Israel this year. Following the widening interest rate, the shekel is strengthening against the dollar today.

Clearly forex markets had already priced in another aggressive Fed rate hike, while US Federal Reserve chair Jerome Powell's comments that the Fed could slow the pace of its hikes has also tempered the strengthening of the dollar.

Powell's words boosted the markets on Wall Street and the only moderate weakening of the shekel seems to have also been influenced by the sharp gains in stock prices. These gains meant that Israeli institutional investors have needed to sell foreign currency to hedge their overseas positions.

The shekel has been gradually strengthening this month from NIS 3.526/$ at the start of July, mainly due to the modest stock market recovery on Wall Street.

Published by Globes, Israel business news - - on July 28 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Shekels Credit: Shutterstock Vladerina32
Shekels Credit: Shutterstock Vladerina32
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