Unstoppable shekel powers further ahead

Shekel Photo: ASAP Creative

Excellence Nessuah: The shekel is on steroids, gaining sharply against all the world's leading currencies also because of Israel's swift vaccination drive.

The shekel is strengthening today against the dollar and against the euro. In afternoon inter-bank trading, the shekel-dollar exchange rate was down 0.72% against the dollar at NIS 3.160/$ and the shekel-euro rate was down 0.89% at NIS 3.839/€.

Yesterday, the Bank of Israel set the representative shekel-dollar rate 0.125% lower from Friday, at NIS 3.183/$, and the representative shekel-euro rate was set 0.718% lower, at NIS 3.873/€.

The shekel is at its strongest against the dollar since 1996 and its strongest against the euro in eight months.

Excellence Nessuah Investment House chief economist Amir Kahanovich said, "The shekel is on steroids, gaining sharply against all the world's leading currencies and now also because of Israel's swift vaccination drive - a measure that puts pressure on low domestic inflation and pushes the Bank of Israel to lower interest. But on the market the trend in the past few days is actually the opposite, with inflation and interest rate expectations rising in accordance with the global trend. In our estimation, just as on the recent occasions that the market expected inflation and the interest rate to rise, it ultimately didn't happen."

With stock exchanges worldwide rising sharply, the exposure of Israel's institutional investors to foreign currency rose in November to 21.3% of their entire investment portfolios, including hedging. Mizrahi Tefahot Bank (TASE:MZTF) chief strategist Modi Shafrir said, "The very high exposure of institutions to foreign currency led last year to a very high correlation between the behavior of stock exchanges and the shekel-dollar exchange rate, so that when world stock markets were rising, exposure of the institutions to foreign currency rose, and since they are remaining at record levels, the institutions are inclined to sell dollars when share prices are rising, in order to reduce their exposure to foreign currency. On the other hand, when the stock markets are falling, the institutions need to increase their collateral and purchase foreign currency.

Published by Globes, Israel business news - en.globes.co.il - on January 12, 2021

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

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
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