The dollar continued to plummet against the shekel on Monday and is currently trading around NIS 3.88, a decline of more than one percent since last Friday. The euro was trading around NIS 4.18 and also weakened slightly. Since the beginning of the war, the dollar has surged against the shekel and peaked at almost 4.10 a week and a half ago, and has been on a downward trend ever since.
The significant comeback of the shekel began last Friday after a relatively moderate speech by Nasrallah, when the dollar crashed against the shekel from NIS 3.99 to NIS 3.92. Today, with the opening of the foreign exchange trading week, there was another significant weakening.
Nasrallah speaking to mark one month of the war in Gaza, photo: Arab networks
After a decline of nearly 5 percent in the dollar-shekel exchange rate within a week and a half, and an increase of more than 7 percent on the Tel Aviv Stock Exchange (Tel Aviv 35 Index), it can be noted that both the dollar exchange rate and the indices on the stock exchange are approaching pre-war levels.
Traders in the foreign exchange market explain the drop since Friday by assessments that the military campaign will be concentrated mainly in Gaza. A senior source in the banking system explains that "the effect of the overall war in the region is dissipating, judging by the stock exchanges and also by the shekel dollar, it seems that the campaign will be concentrated only in Gaza. In the end, the IDF will defeat Hamas and thus bring about a security change in the entire region. Therefore, despite the enormous costs of the war to the economy, there is optimism that the security threat from Gaza will be greatly reduced in the long term."
A trader in the foreign exchange market compares dollar-shekel trading to "manic depression." "Anyone who bought dollars as a defense against a Lebanese front scenario is throwing away the defense now. Is it logical to price the probability of a Lebanese conflagration (on their part or on our part) at zero? To me, no. War is a very dynamic business, and in my opinion, those on the outside should be happy that the capital market is giving them the opportunity to hedge negative scenarios cheaply."
In Israel, they waited for Hezbollah Secretary-General Hassan Nasrallah to understand whether he intended to start a full-scale war against Israel. In his speech, he said, among other things, that "the decision to launch an attack against Israel was one hundred percent Palestinian" and threatened that if Israel "launches a preemptive attack in Lebanon, it will make the biggest mistake in its history." Apart from Nasrallah's speech, it should be noted that the dollar weakened against the world's leading currencies against the background of price increases on the US stock exchange.
According to Ronen Menachem, Chief Market Economist, Mizrahi Tefahot: "The experts interpreted Hassan Nasrallah's speech as lukewarm, which in effect defined the campaign in the south as a Palestinian campaign and not a regional campaign. His speech was considered relatively moderate. Since we know that a large part of the depreciation of the shekel stemmed from fears of a regional war, Nasrallah's statement supported the shekel."
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