FXCM Israel: Quantitative easing in Europe and the pace of interest rate hikes in the US will determine exchange rate trends.
The shekel is again strengthening today against the dollar and stable against the euro. In morning inter-bank trading, the shekel was down 0.26% against the dollar from yesterday's representative rate at NIS 3.7923/$, and down 0.02% against the euro at NIS 4.0795/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate down 0.184% compared with Tuesday's rate at NIS 3.802/$, and the representative shekel-euro rate was set down 0.176% at NIS 4.081/€.
FXCM Israel said in its morning survey, "The shekel-dollar exchange rate fell below NIS 3.785/$ in early morning trading, its lowest level since November 9. Breaking below NIS 3.80/$ may break the bullish nature of the trend and hasten a fall to new lows. The dollar's weakness over the past few days stems mainly from investors eyeing the euro after the Italian referendum and ahead of the European Central Bank meeting, which traders believe will see the ECB signal a reduction in quantitative expansion. If the ECB does indeed indicate that it is changing its policies, the euro can be expected to strengthen. On the other hand, if the bank extends the quantitative expansion program, the euro can be expected to continue losing value. Regarding the dollar, the sharp correction over the past two weeks, follows the sharp appreciation we saw after Trump's victory and it seems that traders realized that they pushed the US currency too high. Now everybody is waiting for the US Federal Reserve's interest rate decision next week, with the widespread belief that the bank will put up interest rates but what will determine the dollar's trend in the coming months is the pace at which rates are raised in 2017."
Published by Globes [online], Israel business news - www.globes-online.com - on December 8, 2016
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