Shekel weakens ahead of January CPI

Shekel Photo: Shutterstock

Although economists predict prices fell in January, the steep fall in January 2018 ensures that the 12-month inflation figure will rise.

The shekel is weakening today against the dollar and stable against the euro. In late morning inter-bank trading, the shekel-dollar exchange rate is up 0.12% against the dollar at NIS 3.657/$ and up 0.03% against the euro at 4.12/€.

Yesterday, the Bank of Israel set the shekel-dollar representative rate down 0.165% at NIS 3.637/$ from Tuesday's rate and set the shekel-euro rate down 0.015% at 4.115/€.

In Israel, the Central Bureau of Statistics will announce the Consumer Price Index (CPI) for January tomorrow. Economists predict that the January CPI fell 0.3% but taking into account that the January 2018 CPI fell 0.5%, this would push inflation over the past 12 months back up to 1%, just at the bottom of the 1%-3% annual target range of the Bank of Israel.

Nevertheless, the interest rate gap between the shekel and the dollar remains wide. The US Fed has raised interest rates nine times since 2015 to 2.25-2.50%. In contrast, the Bank of Israel raised the interest rate by 0.15% in December to 0.25% - it's first rate hike since June 2011. Only one rate hike is expected in 2019 by the Bank of Israel while the Fed is talking about two hikes.

Meanwhile, the dollar has returned to gains on world forex markets on strong US inflation data while the euro continues to struggle on more weak figures.

Published by Globes, Israel business news - en.globes.co.il - on February 14, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Shekel Photo: Shutterstock
Shekel Photo: Shutterstock
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