Shekel weakens as rate hike effect fades

Shekel Photo: ASAP Creative

The momentum given the shekel last week when the Bank of Israel unexpectedly raised the interest rate to 0.25% has run out of steam.

The shekel is weakening today against the dollar and against the euro. In early afternoon inter-bank trading, the shekel-dollar exchange rate is up 0.40% against the dollar at NIS 3.733/$ and up 1.16% against the euro at 4.261/€.

Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.459% at NIS 3.718/$ from Friday's rate and set the shekel-euro rate up 0.017% at 4.212/€.

The momentum given the shekel last week when the Bank of Israel unexpectedly raised the interest rate by 15 basis points from its historic low of 0.1%, where it had been anchored since March 2015, to 0.25% has faded. Moreover, with gasoline prices falling by NIS 0.47 over the weekend, there is a chance that inflation, currently running at an annual rate of 1.2%, may fall below the government's 1%-3% target range, delaying the next planned rate hike in 2019, and maintaining the wide interest rate gap between the shekel and the dollar.

The IDF's actions this morning on the northern border to unearth Hezbollah tunnels has also raised regional tensions.

On international markets, the 'safe-haven' dollar is weakening due to the US-China trade truce, with the euro strengthening sharply.

Published by Globes, Israel business news - en.globes.co.il - on December 4, 2018

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

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Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
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