The weakening of the shekel against the dollar continues. In afternoon inter-bank trading, the shekel exchange rate is up 0.42% against the dollar at NIS 3.366/$ and up 0.25% against the euro at NIS 3.537/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate up 1.055% from Friday, at NIS 3.352/$, and the representative shekel-euro rate was set 0.441% higher at NIS 3.528/€.
The dollar is at its strongest on world markets since 2002 ahead of US Federal Reserve monetary tightening policies. In addition to an expected rate hike of 0.5% tomorrow by the Fed, the dollar is serving as a safe haven currency as the Russia-Ukraine war intensifies global economic uncertainty.
Since the start of 2022 the shekel has depreciated 7.8% against the dollar including 4.4% in April alone. Against the basket of the world’s major currencies the shekel is 2.7% weaker since the start of the year.
In the short term the shekel is expected to continue weakening as the Fed continues to raise interest rates to battle inflation and the uncertainty caused by the Russia-Ukraine war persists. In addition, stock market declines compel Israeli institutional investors to buy foreign currency and sell shekels to hedge their overseas positions. But Bank Hapoalim economists insist that the basic factors supporting the strength of the shekel have not changed but in the short terms the direction of Wall Street will be the dominant factor.
A weaker shekel means that imported inflation will rise and Bank Hapoalim economists have raised their Israel inflation forecast for 2022 to 2.9% – still below the 3.5% that the Consumer Price Index (CPI) has risen over the past 12 months.
Published by Globes, Israel business news – en.globes.co.il – on May 3, 2022.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.
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