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2022, the first week: Sharp price declines in the US - and moderate in Europe and Israel | Israel Today

2022-01-06T21:38:07.362Z


The declines are attributed to fears that the US Federal Reserve will raise interest rates on the dollar sooner than expected.


Investors' expectation that the US Federal Reserve will raise interest rates on the dollar sooner than expected has led to sharp price declines in the US - and also affected the European and Israeli stock exchanges, which recorded more moderate declines yesterday.

The leading indices in Europe closed down 1.2% -1.4%, the Tel Aviv 35 index decreased by 0.4%. The dollar traded higher against the shekel and reached a level of 3.1240 during the trading day. Its representative rate was set at 3.1090.

The declines in the markets are attributed to the publication of the minutes of the US Federal Reserve, from the latest interest rate announcement. .

That is, will sell the bonds purchased over the past year and a half.

How will US interest rate hikes affect Israel?

The basic conditions in Israel - such as the current account surplus and the massive investments of foreign entities in Israeli companies - still support a strong shekel, but now the trend can be reversed.

The declines in foreign markets may cause Israeli institutional entities, which define their exposure abroad by selling dollars, to change direction - to buy dollars and sell shekels, which will cause the dollar to strengthen against the shekel.

In addition, inflation in Israel is lower than in most OECD countries, and according to the Bank of Israel's Research Division, it is expected to slow down to 1.6% in 2022.

"We are in a different place from countries with inflationary pressures, and this is an important advantage of the Israeli economy at the moment," the Governor of the Bank of Israel, Prof. Amir Yaron, said this week.

According to the Bank of Israel, the interest rate on the shekel will remain unchanged or rise only once by the end of 2022. This means that the interest rate differential between Israel and the United States will widen as early as next year, which will support the weakening of the shekel.

Modi Shafrir, Chief Strategist of Mizrahi Tefahot Bank: "The Fed Protocol, which revealed that members of the Monetary Committee are considering reducing the Fed's balance sheet after the rise in interest rates, led yesterday to a sharp rise in long-term bond yields, hence a sharp decline in the Nasdaq At the price of gold. "

He said, "Markets are now pricing a 75% probability that the Fed will raise interest rates for the first time as early as March 2022. In Israel, on the other hand, the governor was very 'June' this week and used the word" patience "several times during the press conference. .

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Source: israelhayom

All news articles on 2022-01-06

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