Despite the expectation of a sharp interest rate hike, the shekel weakened sharply today (Monday) against the dollar mainly in light of the sharp declines in the stock markets around the world and increasing fears of a possible bankruptcy of Credit Suisse.
The shekel weakened against the dollar by about 1% to a level of 3.60 - a low of more than two years.
The Swiss bank's stock has fallen by 60% since the beginning of the year amid concerns about the bank's financial stability and lingering doubts about the new management's ability to carry out an effective efficiency plan.
This morning the stock fell 7% to a low of 3.7 francs on the Zurich stock exchange, and the bank's CDS (a financial contract that prices insurance against defaults) has doubled since Friday.
The shekel against the dollar is at a two-year low // Photo: Reuters
Following concerns about the worsening of the financial crisis, many investors prefer to buy assets that are considered safe, such as the dollar.
On top of that, the declines in the international markets cause the Israeli institutional bodies to buy dollars to hedge themselves.
When asked why the increase in the shekel interest rate no longer affects the exchange rate of the Hekal, one of the traders explained: "When there are the winds of crisis in the air, everything else is dwarfed."
Bank Hapoalim financial markets strategist Modi Shafferer said in a conversation with Israel Hayom: "The dollar-shekel exchange rate is less affected by the nominal interest rate differences between the US and Israel, but more by the behavior of the stock markets in the world - the dollar-shekel rises when the markets abroad fall sharply , and vice versa, when in the long term - the basic forces - such as a significant surplus in the current account and the scope of the direct investments of the foreign entities in Israel support a stronger shekel."
Are we facing an acute financial crisis like it was in 2008?
Against the background of fears of bankruptcy of one of the largest banks in the world, the question arises as to whether the global economy is facing an acute economic crisis similar to 2008, which began with the collapse of the American investment bank Lehman Brothers.
Alex Zebzinski, Chief Economist at the Meitav Investment House replies in the negative: "There are always concerns, but are we facing a crisis like in 2008 at the moment I don't think so. I don't see any signs of that. In 2008 there was clearly a real estate asset bubble in the US .
Today I am less likely to recognize a bubble of this type or of this magnitude.
There are enough reasons for slowing growth, but I don't think anything threatens such a crisis.
Credit Suite is an event related to the specific bank and not to the banking system as a whole."
A U-turn by the British Prime Minister
In the meantime, let's recall that the Bank of England announced last week the dramatic intervention in the bond market whose yields jumped in response to the plans of the new government. Following sharp criticism, Prime Minister Truss withdrew this morning from the announcement of a tax reduction plan, and this after less than a month in power.
Liz Truss, photo: EPA
Finance Minister Kwesi Kuarteng said the decision to cancel the top rate tax cut was made with "some regret".
The intention of the British Prime Minister was to protect households from a spike in electricity and energy expenses, but her plans were met with sharp criticism from economists, among other things, because of the volume of loans that would be required for timely financing, and this at a time of high inflation.
The International Monetary Fund even called on the British government to "re-evaluate" its plans.
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