Shekel weakens against dollar despite Trump's Fed remarks

Shekel Photo: Shutterstock

President Donald Trump's criticism of US Fed policy puts into question its plan for four more rate hikes by the end of 2019.

The shekel is weakening today against the dollar and against the euro. In late morning inter-bank trading, the shekel-dollar exchange rate is up 0.21% against the dollar at NIS 3.634/$ and up 0.83% against the euro at 4.202/€.

Yesterday, the Bank of Israel set the shekel-dollar representative rate down 0.439% at NIS 3.626/$ from Tuesday's rate and set the shekel-euro rate down 0.041% at 4.168/€.

The dollar is stronger against the shekel, but generally weaker on world forex markets, following outspokenly critical comments by US President Donald Trump on the series of interest rate hikes being implemented by the US Federal Reserve. He described Fed policy as "crazy" and "a mistake" which is making the cost of loans very expensive.

Last month, the Fed raised the interest rate by 25 basis points to 2%-2.25%. This was the eighth such hike since 2015, during which time the Bank of Israel has kept the interest rate here at its historic low of 0.1%. Moreover, the Fed plans another rate hike in December, three more in 2019 and one more in 2020. Even before Trump's comments, the dollar was down from a 7-week high after a fall in US bond yields.

In Israel earlier this week, the Bank of Israel Monetary Committee's decided to keep the interest rate unchanged at 0.1%. It was the last meeting under Governor Karnit Flug whose five year term ends next month. She will be replaced by Prof. Amir Yaron, a banking and finance specialist, from the University of Pennsylvania's Wharton School.

One of Prof. Yaron's first tasks will be to consider if and when to raise the interest rate. Many analysts do not see an Israeli rate rise this year. Goldman Sachs sees the Bank of Israel raising the interest rate in the first quarter of 2019 and not before because inflation in Israel in 2018 is expected to be only 0.9%, below the government's annual target range of 1%-3%.

Published by Globes [online], Israel business news - - on October 11, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Shekel Photo: Shutterstock
Shekel Photo: Shutterstock
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