The political chaos in Israel and the decision to call early Knesset elections are continuing to sharply weaken the shekel. The shekel continues to depreciate against the US dollar, and the shekel-dollar exchange rate is now at its weakest against the dollar since September 2012 and on the threshold of NIS 4/$.
The shekel-dollar rate is currently 0.88% above yesterday's representative rate, at NIS 3.993/$, while the shekel-euro rate is 0.01% lower, at NIS 4.925/€.
Yesterday, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.958/$, up 1.124% on yesterday's rate, and set the shekel-euro representative exchange rate at NIS 4.926/€, up 1.019%.
FXCM Israel says this morning, "The shekel is collapsing following the breakup of the government and the announcement of elections. Yesterday, after it became clear that there is no way out of dissolving the government and early elections, the shekel-dollar exchange rate soared to NIS 3.985/$, the highest rate since September 2012 and NIS 4/$ is already on the horizon. The dizzying depreciation of the shekel in just a few hours makes tangible the gravity of the harm that the breakup of the government is doing to market trust in Israel's political leadership, which may have the most negative impact on the Israeli economy and hit growth in 2015.
FXCM continued, "It is hard to see what might now stop the sharp depreciation in the value of the shekel. Paralyzing systems, freezing reforms, the absence of a finance minister and the political uncertainty that will occur in the coming months of the election campaign will only strengthen the pressure on the shekel and deter investors. If the depreciation of the shekel in recent months was a positive influence on the Israeli economy - mainly for the export sector - but such a sharp depreciation, which is expected to continue in the coming months, is now a danger to the Israeli economy.
Published by Globes [online], Israel business news - www.globes-online.com - on December 3, 2014
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