The shekel is weakening against the dollar today and strengthening against the euro. In early afternoon inter-bank trading, the shekel was up 0.45% against the dollar at NIS 3.123/$ and down 0.40% against the euro at NIS 3.577/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate up 0.097% from Tuesday, at NIS 3.109/$, and the representative shekel-euro rate was set 0.058% lower at NIS 3.592/€. Earlier in the week the shekel hit a new 25 year peak against the dollar of NIS 3.08/$ before the Bank of Israel intervened aggressively on the foreign exchange market to purchase foreign currency and weaken the shekel to assist exporters.
The shekel has been weakening today against the dollar as the US currency strengthened worldwide due to the rise in bond returns after the Us government failed to issue a 30 year bond. In addition, Israeli financial institutions have been selling shekels to hedge their investments following yesterday's stock market falls.
BlackRock Israel head Anath Levin said, "It is reasonable to assume that the basic factors contributing to the strengthening of the shekel will continue. But the picture could change. US inflation data published yesterday exceeded the forecasts with inflation rising to 0.9% last month and 6.2% annually. This figure challenges the Federal Reserve's claim that inflation is due to passing factors, and it cannot be ruled out that the hike in US interest rates might come earlier than expected. But raising the interest rate as a restraining measure, when inflation stems from the current supply side and supply disruptions, could stifle the economy.
"On the other hand, job figures in the US for November and December may reflect a return to work by employees who weren't in a rush to return to work so that the situation in the US job market represents an important part of Fed decisions before hiking the rate which might contribute to divided expectations on rate hikes. Hiking the US rate is expected to strengthen the dollar, among other things, against the shekel and that could benefit exporters and provide some quiet for the Bank of Israel, unless the Bank of Israel will also raise the rate. However, the Bank of Israel also sees inflation as temporary and in its estimation the rate will remain low for a long time."
Published by Globes, Israel business news - en.globes.co.il - on November 11, 2021.
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