The trend of depreciation of the shekel that characterized foreign exchange trading in recent weeks is beginning to reverse: today (Tuesday), the Israeli currency strengthened by 0.6 percent against the dollar, and is now trading among the banks at 3.71 percent. Against the euro, the shekel strengthened by 0.8 percent to about 3.96 percent.
"The trend of shekel appreciation, if it continues, is expected to support lower inflation already in the CPI for June through reduced travel abroad and fuel prices," Leader Capital Markets Chief Economist Jonathan Katz estimates. "This may also increase the likelihood that interest rates will not rise beyond the current level of 4.75%."
Leader Capital Markets Chief Economist Jonathan Katz, Photo: Zvika Dor
The foreign exchange market explains that the shekel's appreciation is related, among other things, to traders' assessments that "the reform is dead."
According to a senior trader in the foreign exchange market: "Overall, and despite everything, the Israeli economy is in good shape. Those who raised the dollar exchange rate in recent weeks are the foreign banks, which buy dollars, but now, after the passage of the budget and rumors of a substantial change in the legal reform, we are seeing a return to normal. The current account is a big plus – in 2022 there is a surplus of dollar sales of about $20 billion."
"In addition," the official explains. "The war in Ukraine is increasing the defense budgets of many countries, which benefits defense companies in Israel, so we started to see a few weeks later foreign banks selling dollars as well."
The Bank of Israel will announce the interest rate on July 10, after ten consecutive increases.
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