Shekel gains sharply despite US rate hike

Shekels Photo: Shutterstock

FXCM Israel: It was a case of buy on rumors and sell on news as long traders sold the dollar.

The shekel is strengthening sharply against the dollar and is weakening against the euro today. In morning inter-bank trading, the shekel-dollar exchange rate was down 0.91% from yesterday's representative rate at NIS 3.625/$, and up 0.19% against the euro at 3.895/€.

The shekel is stronger against the dollar even though the US Fed last night announced an interest rate hike and spoke about two more rate hikes during 2017. Back in Israel, the Central Bureau of Statistics announced that the February Consumer Price Index (CPI) was unchanged but that housing prices had resumed rising in December and January - up 0.5% in that period.

Yesterday, the Bank of Israel set the shekel-dollar representative rate down 0.082% compared with Tuesday's rate at NIS 3.658/$, and the representative shekel-euro rate was set down 0.144% at NIS 3.887/€.

FXCM Israel said in its daily review this morning, "The shekel-dollar exchange rate plunged to a new-low at around NIS 3.625/$, the lowest level since September 2014, and this despite the US Fed raising the interest rate yesterday, as expected, by 0.25%. The rate hike was already, to a large extent, priced into the market. On world markets too, the dollar weakened following the Fed's decision. In effect, we say the well-known behavior of buy on rumors and sell on the news, with long-traders essentially cashing in on profits on their gamble immediately after the decision. We will now see over the next few days if the rate hike and the expectation of two more hikes will support the dollar, or if the market expected more."

FXCM Israel added, "The sharp fall in the shekel-dollar exchange rate to a new low puts the Bank of Israel under pressure to halt the appreciation of the shekel, which hits exporters. We will see whether in light of the low exchange rate the Bank of Israel chooses to intervene once again in the coming few days."

Published by Globes [online], Israel business news - www.globes-online.com - on March 16, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Shekels Photo: Shutterstock
Shekels Photo: Shutterstock
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