The dollar and the euro are almost equal:
the euro is at a 20-year low against the dollar, and is currently trading at 1.0170.
Recall that the euro was launched in 1999, and only in the first three years showed weakness against the dollar.
The strengthening of the world dollar in recent days is explained by the publication of the minutes of the Federal Reserve, which clearly signals that it is determined to do everything necessary to lower inflation and to continue to raise interest rates at a sharp pace.
On the other hand, the European Central Bank is more hesitant and will raise interest rates in July at a slower pace.
Despite the strengthening of the dollar in the world, the situation against the shekel is different.
Trading in the local foreign exchange market has been highly volatile in recent days. After the dollar reached a two-year high against the shekel at the beginning of the week (NIS 3.54), the trend seems to have reversed in the last two days - and the dollar has weakened against the shekel.
The US dollar, Photo: AFP
Earlier this week, the Governor of the Bank of Israel raised the interest rate sharply and not "gradually", as he promised only a few months ago, to a level of 1.25%.
The Central Bank's Research Division expects the interest rate to reach 2.75% in a year from now, thus significantly reducing future interest rate differentials between the dollar and the shekel, which strengthens the shekel against the dollar.
In the US, it will be recalled, the expectation is that interest rates will reach a level of 3.5% by the end of the first quarter of 2023, and then begin to fall.
As a result of the crash of the euro against the dollar, the exchange rate of the euro against the shekel is also falling, which reduces the price of vacations in Europe for Israelis - from shopping to flights.
Since the beginning of the week, the euro has fallen by more than 4%, from NIS 3.67 to the euro - and is now trading at around NIS 3.53, at a distance of only 3% from the historical low recorded in this pair in 2000 - NIS 3.41.
Calm in the markets?
Yossi Frank, CEO of Energy Finance for risk management, predicts a correction in the stock markets, resulting in the strengthening of the shekel. In a conversation with Israel Today, he explained that "inflation forecasts in Israel and around the world are starting to fall quite sharply, and there is no more panic.
Oil is starting to fall and is already trading 20% below the peak price.
I do not say that it has completely calmed down, because it depends on the war between Russia and Ukraine. "
Frank emphasizes that "there is a difference between us and other countries. In the US, inflation has jumped from 2% a year to 8%, so there is panic.
We were five years below the target, between 0% -1%, what happened that one year we were above?
Therefore raising this interest rate by half a percent was quite excessive, reflecting the lack of long-term planning and pulling out of the sleeve.
It hurts everything the Bank of Israel has done in the last decade since the Great Depression. "
In Frankfurt, a better mutual understanding was formed regarding immigrants compared to other German cities.
Becker // Photo: Yossi Zeliger // In Frankfurt, a better mutual understanding was formed regarding immigrants compared to other German cities.
Beef,
Euro banknotes, in 2020, Photo: Dudu Greenspan
What is your forecast for the markets?
"In terms of markets, I do not expect big falls. Everything that should have fallen - fell, I do not expect beyond that. Most of the world is built on high-tech, and there is a big difference between today and 2000. Today the whole future is high-tech, medicine is high-tech, agriculture is "High-tech, infrastructure is high-tech, so this world has its own feasibility, it is not possible for everything to collapse. There was a celebration in high-tech that is over, but there are still recruitments that come to Israel as well, but at lower values."
He added: "I expect a calm in the markets and some correction for the falls that were in the first half of the year. I do not expect increases like there were in 2021, but definitely some kind of calm and correction. Once there is a calm and correction in the markets, the shekel automatically strengthens."
How do you explain the rise of the dollar to these levels?
"Several factors gambled on the shekel very aggressively, they close their bets so we saw a jump of the dollar. But once it is over, what will determine again will be the surplus in the current account, so I see the strengthening of the shekel. To what level? It is always a question. "As soon as a certain wave begins, the speculators join it, and the Bank of Israel has shown that it is not in the picture. Defining where the floor is is very dangerous. I see a return to levels of NIS 3.30."
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