The shekel is weakening today against the dollar and strengthening against the euro. In early afternoon inter-bank trading, the shekel-dollar exchange rate is up 0.50% against the dollar at NIS 3.644/$ and down 0.19% against the euro at 4.204/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.583% at NIS 3.626/$ from Friday's rate and set the shekel-euro rate up 0.792% at 4.212/€.
The shekel-dollar exchange rate continues to rise following last week's decision by the US Federal Reserve to raise the interest rate by 25 basis points to 1.75%-2%. Moreover, Fed chairman Jerome Powell was bullish on the US economy and said there would be two more rate hikes this year. This will widen the interest gap with the shekel and weigh on the Israeli currency.
The Bank of Israel cut the interest rate to an historic low of 0.1% in March 2015 and it has been anchored there ever since. The Bank of Israel has said it will raise interest rates when inflation moves back towards its annual target of 1%-3%, probably in the final quarter of 2018. After four years of negative or negligible inflation, the rate has risen by 0.8% over the past 12 months, and the Consumer Price Index (CPI) figure for June, announced by the Central Bureau of Statistics on Friday, showed a rise of 0.5% last month.
However, the Israeli economy remains robust with annual GDP growth of over 4% and market experts do not see much scope for the shekel-dollar exchange rate to rise too much further.
Meanwhile the euro is weakening worldwide after the European Central Bank officials said that no interest rate hike is expected until the summer of 2019, with the current rate pegged between 0%-0.4%.
Published by Globes [online], Israel business news - www.globes-online.com - on June 19, 2018
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