The shekel is weakening today against the US dollar and stable against the euro and is at its weakest against the dollar since April. In afternoon inter-bank the shekel is 0.37% higher against the dollar at NIS 3.767/$ and 0.03% lower against the euro at 4.036/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.16% from Friday, at NIS 3.753/$, and the representative shekel-euro rate was set 0.358% higher at NIS 4.035/€.
Bank Hapoalim chief strategist Modi Shafrir says, "The shekel has weakened against the dollar in the last month both for global reasons (the strengthening of the dollar on world markets), and for local reasons - the increase in the risk premium of the local economy, as reflected in the weakening of the shekel, in the underperformance of the local stock exchange, in the increase in yields in the local government bonds market, the increase in Israel's CDS premium and the increase in the spread between Israel's 10-year dollar bond yield and the corresponding US Treasury bond."
Mizrahi Tefahot Bank chief markets economist Ronen Menachem agrees, "The shekel's depreciation is due to both the strengthening of the dollar globally and local weakness. This is also reflected in the declines in the stock markets and even more so in the bond markets. Confusion and uncertainty characterize all the areas in which the market operates - security, political and economic. There is no sign of improvement, or any direction in any of them." "
In my estimation, the renewal of the discourse on the judicial reform also affects the sentiment in the market to some extent. In such a state of affairs, it is difficult for the investing public to make decisions and the shekel tends to be damaged by this situation. Also the proximity of the interest rate announcement and the new economic forecast of the Bank of Israel this coming Monday affects the foreign exchange market and therefore it is in a kind of standby position."
"At the same time, it should be taken into account that while the shekel has weakened by 1.4% against the dollar over the last month, the euro has also weakened against the dollar by a similar rate of 1.2% due to the political upheavals in Europe (especially in France). When you take this into account, and remember that the shekel has already reached levels of NIS 4.08/$ during the war and that the Bank of Israel is closely monitoring what is happening, it is still not possible to detect any panic, or a worsening of the shekel's weakening trend over the recent period. One should be very careful about drawing conclusions based on a single day, or several days, since the shekel reacts quickly and strongly to positive and negative developments, sometimes during the trading day itself."
Published by Globes, Israel business news - en.globes.co.il - on July 2, 2024.
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