The rapid depreciation of the shekel has been stemmed following last-night's agreement for an indefinite cease-fire between Israel and Hamas. In morning interbank trading the shekel-dollar exchange rate was down 0.14% from yesterday's representative rate, at NIS 3.567/$, and the shekel-euro rate was down 0.16%, at NIS 4.708/€.
Yesterday, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.572/$, up 0.819% on Monday's rate, and set the shekel-euro representative exchange rate at NIS 4.716/€, up 0.838%.
FXCM Israel research department said, "On the one hand the temporary end to the military skirmish should somewhat moderate shekel growth although discussions now begin on the budget, which pose a complex dilemma for the finance minister and prime minister - whether to raise taxes or expand the deficit. If we have so far got used to the idea that the shekel-dollar exchange rate is not connected to economic and geo-political developments, the situation has now changed and the shekel will become sensitive to every piece of data and economic declaration."
Prof. Michel Strawczynski of the Hebrew University said, "The Bank of Israel's decision is a call to the minister of finance to roll up his sleeves and apply appropriate macroeconomic policies to encourage exports through a package of measures (not only by the Bank of Israel) that will protect the recent depreciation of the shekel; balanced fiscal expansion that will allow the rehabilitation of civilian spending, while financing it from cancelling tax exemptions and a measured raising of the deficit from 2.5% to 2.75%."
Published by Globes [online], Israel business news - www.globes-online.com - on August 27, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014