The shekel strengthens strongly again. In late morning interbank trading, the shekel-dollar rate is 1.07% lower at 3.609 NIS/$, and the shekel-euro rate is 1.04% lower at 3.998 NIS/€. The dollar is trading at its lowest level against the shekel since July and the euro is trading at its lowest level against the shekel since June.
Yesterday, the Bank of Israel set the shekel-dollar representative rate 0.137% higher than Tuesday, at NIS 3.648/$, and the shekel-euro representative rate was set 0.128% higher at NIS 3.990/$. €.
The shekel has seen a remarkable recovery over the past two months. By the end of October, the Israeli currency had fallen to 4.08 NIS/$, following the atrocities of Hamas on October 7 and the outbreak of war. But last week, the shekel strengthened by 10% to NIS 3.70/$ and is now heading towards NIS 3.60/$.
On the eve of the war, the shekel was trading at 3.85 NIS/$. As the Israeli currency continues to strengthen, it becomes clear that the market was more concerned about the social divide in Israel caused by the government’s planned judicial reform than the war with Hamas.
Alim Remtulla, EFG currency strategist, forecasts a strengthening of the shekel to 3.55-3.60 NIS/$ in the first quarter of 2024, which will among other things bring Israeli institutional investors back to the Tel Aviv Stock Exchange.
The Bank of Israel initiated the recovery of the shekel by announcing, immediately after the start of the war, a plan to sell foreign currencies of up to $30 billion. This has calmed the markets, and in practice the Bank of Israel has so far sold only $8.5 billion in foreign currency to moderate the weakening of the shekel, including $8.2 billion in October .
With annual inflation in Israel now down to 3.3%, some analysts now expect the Bank of Israel’s Monetary Committee, led by Governor Professor Amir Yaron, to reduce the rate. interest of 4.75% at its next meeting on January 4. Others insist that the ongoing strengthening of the shekel reflects the belief that the rate will not be cut next month. Regardless, in the longer term, the interest rate is unlikely to have an impact on the shekel since the US Federal Reserve is also expected to cut interest rates in early 2024.
Published by Globes, Israel Business News – fr.globes.co.il – December 21, 2023.
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