The dollar continued to strengthen against the shekel even today (Friday) and jumps by almost a percent from the morning hours to about 3.54.
Its representative price was locked at a lower level - NIS 3.5070.
Since the beginning of the week, the dollar has jumped by about 3.5%, and this is against the background of the prevailing uncertainty in the economy surrounding the legal revolution (various warnings regarding its consequences on the economy and announcements by various companies regarding spending money abroad) as well as declines in the US stock market.
We note that the dollar also strengthened against the world's leading currencies, but at a significantly lower rate - against the euro, for example, it strengthened by about 0.8% since the beginning of the week.
"In recent days, we have seen the dollar rise against the shekel due to many purchases by the foreign institutions. The capital market likes stability and certainty in the markets. Israel is a relatively small market, and investors in the world sometimes look at the newspaper headlines and dive less into the details, when they invest in a market of this size," he says in a conversation With "Israel Hayom" Roni Gitlin, manager of Bank Leumi's foreign securities transaction room.
Gitlin adds: "As the markets calm down and the political issue drops out of the chapter, we will again see the strength of the state and with it the currency."
The background of the uncertainty prevailing in the economy surrounding the legal revolution in the background.
Netanyahu and Levin, photo: Oren Ben Hakon
Will the Bank of Israel raise the interest rate by 0.5%?
The fear in the capital market today is that the strengthening of the dollar against the shekel could increase inflationary pressures in Israel.
Recall that the year 2022 ended with inflation of 5.3% - a 20-year record, and unlike the USA, inflation in Israel has not yet begun to decrease, despite the Bank of Israel's aggressive interest rate hike. in the economy
Governor of the Bank of Israel Amir Yaron, photo: Oren Ben Hakon
Since April last year, the Bank of Israel has raised the interest rate seven times in a row from the level of 0.1% to the current level of 3.75%.
The Bank of Israel's upcoming decision regarding the interest rate in the economy will be published on February 20, and according to most estimates the governor is expected to raise the interest rate by 0.25% to 4%.
This, similar to the US Federal Bank which lowered the rate of interest rate increases and settled for a quarter percent increase last week.
However, the sharp devaluation that is occurring in the shekel may cause Governor Yaron to raise the interest rate even higher - 0.5%.
According to Modi Shafferer, chief financial markets strategist at Bank Hapoalim, "The market expects a 0.25% increase, and so do we. However, there is a chance that the Bank of Israel will raise the interest rate by 0.5% in the upcoming decision, everything depends on the dollar-shekel exchange rate, if the shekel continues to weaken and will trade at levels of 3.60-3.65, there is definitely a chance that it will rise by 0.5%"
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