The shekel is stronger against the dollar and weaker against the euro in inter-bank trading this morning after Israel's Central Bureau of Statistics announced last night that the March Consumer Price Index (CPI) rose 0.3%. The rise, slightly lower than expected, gives Bank of Israel breathing space in setting policy, and takes the pressure off the need to again cut interest rates and introduce quantitative easing.
The shekel-dollar exchange rate is currently trading down 0.55% against the dollar at NIS 3.953/$ and the Israeli currency is up 0.19% against the euro at 4.227/€.
Yesterday, the Bank of Israel set the shekel-dollar representative exchange rate down 0.226% from Tuesday's rate at NIS 3.975/$, and set the shekel-euro representative exchange rate at NIS 4.219/€, up 0.166%.
FXCM Israel research department said this morning, "The shekel-dollar exchange rate continues to trade under pressure, mainly due to the weakness of the dollar on world markets over the past day. Yesterday the dollar index fell sharply following publication of the US Fed's budget book, which showed a most tepid picture of the US economy, and cooled US interest rate hike expectations and weakened the dollar. The shekel-dollar rate has again retreated to around the NIS 3.95-96/$ range.
FXCM Israel added, "Despite the 0.3% rise in Israel's March CPI, a little less than expected, inflation is still in negative territory since the start of 2015, with the CPI down 1.3% this year, and 1% over the past 12 months. On the face of it, these statistics strengthen the needs for the Bank of Israel to take additional expansionary steps, such as cutting the interest rate and even quantitative easing. However, at least according to the Bank of Israel's own research department, positive CPI rises are expected in the coming months, and inflation is forecast to return to the target range next year."
Published by Globes [online], Israel business news - www.globes-online.com - on April 16, 2015
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