In recent days, the dollar has reached a new low against the shekel, while the Bank of Israel has refrained from intervening.
During trading yesterday, he was already armed for 3.1 shekels to the dollar.
The last time the dollar was lower than NIS 3.2 was only in January this year, for a short period when it was trading at NIS 3.18.
The Bank of Israel contributed greatly to stabilizing the dollar exchange rate, increasing the rate of dollar purchases in the months when the dollar was supposed to weaken much more.
In an unusual move, the Bank of Israel announced at the end of last year that it would purchase $ 30 billion in dollars this year, and later clarified that this was a minimum purchase amount.
Indeed, already at the end of the summer he completed this huge allotment.
During this period, he refrained from interfering in the market, and as a result the dollar broke the NIS 3.2 barrier.
The effects of inflation
According to Guy Beit-Or, Psagot's chief economist: "In the past, when inflation in Israel was below 1% and there was concern that the strengthening of the shekel would continue to push inflation down, the Bank of Israel feared the effects of the shekel on inflation. Become un anchored around the target. "
"However, when inflation in Israel is already at 2.5% and is expected to continue to rise, the Bank of Israel's set of considerations regarding intervention is becoming completely different," Beit-Or explained.
The Bank of Israel did not intervene, the dollar broke the barrier, Photo: Oren Ben Hakon
According to him, with the development of the global energy crisis and the ongoing disruption in supply chains, it is likely that we will continue to see inflationary surprises in the coming months, and inflation expectations in Israel are already very high and may rise.
"Therefore, it only makes sense that the Bank of Israel would not intervene, so where is the dollar?" Said Beit-Or. "The lower limit is currently at the level of NIS 3.08 per dollar," he estimated.
He further claimed that "as long as the stock markets rise and the sentiment is risk-on, the cyclical factors will support the shekel, which is strengthening."
"Price days will be expensive"
Beyond these factors, Psagot estimates that the foreign exchange market is heading for a change of direction in line with what is rising in the domestic bond market, which is starting to price interest rate hikes earlier than expected and more frequently.
"In our estimation, in the scenario of a 10% correction in the stock markets (fall in the market; AB) and a strong dollar, the shekel may depreciate by about 4.5% -4%."
We are cooling our enthusiasm from the estimate that the weakening of the dollar will lead to a fall in prices towards the sales days of November, such as Black Friday.
Beit-Or is also cooling its enthusiasm for the assessment that the weakening of the dollar will lead to a fall in prices ahead of the November sales days, such as Black Friday and CyberMandi.
According to it, there are a number of factors influencing the rise in prices this year, including a shortage of raw materials, transportation costs and inflation in the world.
All of these outweigh the strengthening of the shekel.