With the Bank of Israel due to announce its September interest rate later today, the shekel has weakened against the major currencies this morning. The shekel-dollar exchange rate is currently down 0.2% in comparison with Friday's representative rate, at NIS 3.8818/$, and the shekel-euro rate is down 2.3%, at NIS 4.4582/€. This is against a background of a weakening of the dollar on global markets, with the turmoil on stock exchanges sending investors to the Swiss franc and Japanese yen rather than to the dollar, since fears of economic slowdown reduce the chances of a rise in US interest rates in the near term.
FXCM Israel writes in its market review this morning, "The shekel-dollar pair opens the week subject to two contrary forces: on the one hand, the sharp fall in the dollar on world markets, and on the other, the weakening of sentiment towards the shekel following the growth and inflation figures recently published in Israel.
"Today, the Bank of Israel is due to publish its monthly interest rate decision. The central bank ought not to change the interest rate, but given the worsening in the macro figures and in global risks, the bank's press conference will attract great attention. If the bank again hints at the possibility of expansionary measures such as a negative interest rate or quantitative easing, or if it expresses a negative stance on the local economy, the shekel-dollar rate will shoot upwards. Over the rest of the week, global trading in the dollar will again assume greater significance."
The Bank of Israel is due to announce its interest rate decision at 16:00. Contrary to FXCM's estimate, several analysts believe that the Bank of Israel will announce an interest rate cut to zero.
Published by Globes [online], Israel business news - www.globes-online.com - on August 24, 2015