The shekel is weakening against the dollar and against the euro today. In early afternoon inter-bank trading, the shekel-dollar exchange rate was up 0.30% from yesterday's representative rate at NIS 3.507/$, and up 0.06% against the euro at 4.128/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate down 0.143% from Friday's rate at NIS 3.496/$ and set the shekel-euro rate down 0.369% at 4.126/€.
The shekel was stronger yesterday after the Central Bureau of Statistics announced Sunday evening that the Consumer Price Index (CPI) unexpectedly rose by 0.1% in September. Analysts had predicted a negative CPI reading for September. Even though inflation is running at only 0.1% over the past 12 months, September's reading and the 0.2% rise in August is offering encouragement that the negative inflation that has characterized the Israeli economy for nearly four years is about to end.
This strengthened the shekel because only a positive inflation figure close to the government's target range of 1%-3% will persuade the Bank of Israel to raise the interest rate above its historic low of 0.1% and close the interest gap with the US. The Bank of Israel will announce its interest rate decision for November on Thursday but it is unlikely to announce a rate hike until the second half of 2018. The rate has remained at 0.1% since March 2015.
The shekel remained strong last week despite traders reporting that the Bank of Israel had purchased foreign currency in attempts to weaken the Israeli currency.
Published by Globes [online], Israel business news - www.globes-online.com - on October 17, 2017
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