Shekel strengthens as inflation climbs

Shekel-dollar ASAP Creative

The likelihood of an interest rate hike in the final quarter of 2018 is growing as inflation in Israel approaches the 1%-3% target range.

The shekel is stable today against the dollar and strengthening against the euro. In early afternoon inter-bank trading, the shekel-dollar exchange rate is down 0.45% against the dollar at NIS 3.583/$ and down 1.36% against the euro at 4.231/€.

Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.700% from Monday's exchange rate at NIS 3.599/$ and set the shekel-euro rate up 0.107% at 4.2995/€.

The shekel is strengthening after the Central Bureau of Statistics announced last night that the Consumer Price Index (CPI) rose 0.4% in April. With inflation now running at 0.4% over the past 12 months, there is a growing likelihood of the Bank of Israel raising the interest rate above the historic low of 0.1% where it has been anchored since March 2015. The Bank of Israel has stated several times that it plans raising the interest rate in the final quarter of 2018, if inflation is approaching the government's target range of 1% to 3%. The possibility of closing the interest rate gap between the shekel and the dollar would be a boost for the Israeli currency.

Another boost for the shekel is that the security situation along the Gaza border seems calmer after some 60 Palestinians were killed by IDF soldiers on Monday, the bloodiest day in Gaza since Operation Protective Edge in 2014.

On world market the dollar is near a five-month high, helped by gains in long-term US treasury yields.

Published by Globes [online], Israel business news - www.globes-online.com - on May 16, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Shekel-dollar ASAP Creative
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