Shekel weakens on BoI rate cut talk

Shekel  / Photo: Shutterstock

Bank of Israel Governor Prof. Amir Yaron observed that the Monetary Committee was not unanimous in keeping the rate unchanged and there were good reasons for cutting the rate below 0.25% already.

The shekel is weakening today against the dollar and against the euro, after the Bank of Israel yesterday left the interest rate unchanged at 0.25%. In inter-bank trading the shekel-dollar exchange rate was up 0.43% at NIS 3.508/$ and up 0.51% against the euro at NIS 3.853/€.

There will be no new representative rate set until Thursday, after Yom Kippur holiday.

Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.345% at NIS 3.493/$ from Friday's exchange rate, and set the shekel-euro rate up 0.359% at 3.834/€.

In yesterday's interest rate decision Bank of Israel Governor Prof. Amir Yaron observed that the Monetary Committee was not unanimous in keeping the rate unchanged and there were good reasons for cutting the rate below 0.25% already. The comments suggested that the rate, which was hiked from 0.1% to 0.25% last November, is likely to be cut back to 0.1% sooner rather than later.

The Bank of Israel also cut Israel's growth forecast for 2020 from 3.5% to 3% due to an expected global slowdown.

Last week, the shekel gained ground because of its inclusion in by FT Russell on the World Government Bond Index (WGBI), starting April 2020. This will increase trading in Israeli government shekel linked bonds and the need to convert foreign currency to shekels in order to purchase them. Bank Leumi chief economist and Gil Buffman and other analysts see Israel's 0.29% weight in the index translating to foreign currency purchases in shekels of government bonds worth about $2 billion.

Published by Globes, Israel business news - en.globes.co.il - on October 8, 2019

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

Shekel  / Photo: Shutterstock
Shekel / Photo: Shutterstock
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