Shekel weaker against dollar as Fed plans 2023 rate hikes

Shekel Photo: ASAP Creative

Mizrahi Tefahot Bank chief economist Ronen Menachem recommends unlinked shekel options.

The foreign exchange market was turbulent this morning after US Federal Reserve Chair Jerome Powell announced measures designed to chill the US economy through tighter monetary policy. Powell said the Fed planned two rate hikes in 2023 and raised the inflation forecast.

With the dollar consequently gaining on international forex markets, the shekel is weakening today against the dollar and strengthening against the euro. In afternoon inter-bank trading, the shekel-dollar rate was up 0.68% against the dollar at NIS 3.261/$ and down 0.76% against the euro at NIS 3.894/€.

Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.093% from Tuesday, at NIS 3.239/$, and the representative shekel-euro rate was set 0.071% higher, at NIS 3.924/€.

The Fed's plan of two rate hikes in 2023 comes when the thinking at the Bank of Israel seems to be in the opposite direction. The protocols of the Bank of Israel's most recent Monetary Committee meeting on the interest rate, which kept the rate unchanged at its historic low of 0.1%, reveals that one member of the committee wanted to cut the rate.

Mizrahi Tefahot Bank chief economist Ronen Menachem said, "As long as the situation remains unchanged, we can assume that the Bank of Israel will get round to thinking about raising the interest rate before 2024, an assessment which supports over the long term, unlinked shekel options. And that's without taking into account that in the US the consumer price index has risen 5% in the past 12 months, while in Israel it has risen just 1.5%.

Published by Globes, Israel business news - en.globes.co.il - on June 17, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
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