The dollar continues to strengthen against the shekel and is currently trading at NIS 3.78, an increase of about 0.7 percent. In the past month, the dollar has risen by more than 3 percent against the shekel. Against the background of yesterday's murderous attack, the Bank of Israel is expected to lower the interest rate following the low index and the approval of the budget with a high deficit target yesterday.
Ronen Menachem, chief market economist, Mizrahi Tefahot, told Israel Hayom that today's depreciation can be attributed to three factors. "First, we see a security escalation in the past 24 hours on all fronts, as well as concern about tension with Egypt. To this must be added the escalation in the US and Houthi sectors. Second, the Consumer Price Index for December, which was again at the low level of expectations and returned to the media discourse the possibility of a further reduction in the interest rate next month."
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The third reason Menachem points out relates to the strengthening of the dollar against the euro and other leading currencies in the world in light of weak economic data on the German economy and industrial output in the European bloc.
Regarding the approval of the war budget for 2024, Menachem notes that "there are question marks regarding the 2024 budget, which is now moving to the Knesset arena and reflects a high budget deficit (6.5% of GDP) and how the debt rating companies will respond to this, when as of today Israel's rating is on a watch list with negative consequences."
Lively activity on the part of foreign banks
Yossi Freiman, CEO of Frico Management, Risk and Investments, explains: "The dollar continues to strengthen, as expected, against the background of robust activity by foreign banks and institutional investors. The weakness of the US equity market, along with the widening dollar-shekel interest rate gap and last night's inflation data, contribute to the expectation of continued widening of the interest rate gap between the dollar and the shekel, a move that contributes to demand for the dollar. The high deficit, and the fear of damage to Israel's credit rating, contribute to the activity of foreign banks, which are reducing exposure to the shekel."
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