The shekel weakened sharply against the US dollar at the start of trading on the foreign exchange market today. The shekel-dollar exchange rate is currently up 1.76% in comparison with the representative rate set last Thursday, at 3.2736. At least two factors are causing the shekel to weaken. Following the determined stance on combating inflation taken by US Federal Reserve chairperson Jerome Powell, expectations have risen of a 0.5% hike in US interest rates in May, and of a similar hike in each of the following meetings of the Federal Open Market Committee, in June and July. The expectation of steep interest rate rises in the US while rates in Israel rise more gradually implies a widening interest rate gap between the dollar and the shekel, leading to a rising exchange rate. RELATED ARTICLES Five reasons why the shekel is weakening Annual inflation in Israel set to climb to 4% "If we let inflation climb, mortgage borrowers will be hurt" BoI hikes rate for first time in four years The other factor contributing to the weakening of the shekel this morning is the recent falls in US stocks. The shekel-dollar exchange rate is strongly correlated with the US stock market, through the hedging activities of Israel financial institutions exposed to that market. When stocks fall in the US, the institutions have to buy dollars and sell shekels to balance their currency positions. Published by Globes, Israel business news - en.globes.co.il - on April 25, 2022. © Copyright of Globes Publisher Itonut (1983) Ltd., 2022.