The dollar plunges against the shekel: The strengthening trend of the shekel against the dollar and the euro against the background of investors' expectation of a compromise in the legal reform continues today, and even more so. Since morning, the dollar has plunged about 1.5% to 3.66, and the euro has fallen 1.3% to 3.9170.
The shekel's appreciation trend began yesterday against the background of the widespread assumption that the talks at the president's residence will soon lead to a compromise. Recall that only last Friday the dollar rose to levels of NIS 3.75. In a conversation with Israel Hayom, Chief Market Economist at Mizrahi Tefahot, Ronen Menachem, explains the move.
Ronen Menachem, Photo: Mizrahi Tefahot
"This is a continuation of the positive sentiment stemming from the media coverage of moving toward agreement on the legal reform issue – a momentum that began yesterday," Menachem says. "This factor was responsible for the lion's share of the shekel's excess depreciation against the dollar in recent weeks. From the outset, when the Governor of the Bank of Israel set a rate of about 10 percent to estimate the depreciation of the surplus, it could be assumed that any development that signaled calm on the issue would be reflected in the relatively rapid strengthening of the shekel. A lull in this arena will help the shekel return to levels that are consistent with the basic factors of the economy."
"It should be remembered that the volatility of the shekel against the dollar is relatively high and also depends on developments in the political-security arena," Menachem concludes. "The high volatility may well continue despite the current appreciation."
Does not lower the forecast but warns against the reform
Meanwhile, an OECD report on Israel's economy was published on Wednesday, stating once again that continued tension over the reform issue will increase the risk attributed to the economy. The report also states that monetary policy in Israel should continue to be restraining as long as inflation does not decline toward the target level of one to three percent. Its current level is five percent, reinforcing assessments that the interest rate will remain high for an extended period, a situation that will provide additional support for the local currency.
"We will continue to work to strengthen our status as one of the most stable countries." Minister of Finance Smotrich,
However, the organization's economists left Israel's growth forecast for the next two years unchanged at 2.9 percent and 3.3 percent, respectively. In addition, the OECD believes that the growth of the Israeli economy will be higher than in other developed countries.
In the background of the opening of the OECD Council of Ministers conference, Finance Minister Bezalel Smotrich said of the publication of the organization's economic forecast report: "I thank the organization for the excellent growth forecast given to us. I have no doubt that Israel's economic resilience and stability in the turbulent waters of the international economy are a significant anchor."
The minister added: "The excellent budget that we recently passed, together with the largest Arrangements Law, add many credits to Israel's image as a country that encourages growth and economic growth. We will continue to work to strengthen Israel and strengthen its status as one of the most developed and stable countries in the world."
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