The shekel has been weakening today against the dollar and against the euro. In afternoon inter-bank trading, the shekel-dollar exchange rate is up 0.62% at 3.632/$ and the shekel-euro rate is up 0.74% at NIS 4.083/€.
On Friday, the Bank of Israel set the representative shekel-dollar rate down 0.249%, at NIS 3.609/$, and the representative shekel-euro rate was set 0.369% higher at NIS 4.053/€.
Mizrahi Tefahot Bank chief economist Ronen Menachem explains, “The depreciation of the shekel this morning against the euro and the dollar reflects once again the volatility and strong reactivity of the shekel to domestic developments and assessments of them. The (judicial reform) legislative process is progressing and the timetables are clear – the coalition’s intention is to approve the law to curb the unreasonableness clause by next week, at the end of the session. Hence the protests planned for the rest of the week.
Menachem adds, “It is likely that as the moment of decision get closer, nervousness in the foreign exchange market will increase. Two important things must be remembered on this matter. Firstly this is a period when the shekel fluctuates in a relatively wide range of plus or minus NIS 0.20. Secondly, the shekel is deep within the area that the Bank of Israel has identified as an excessive devaluation of the currency and a factor that may generate inflationary pressures in the future. This is a situation that does not work in the best interest of the shekel.”
“Another point is that there are (slight, admittedly) declines in the US stock markets, which can also affect the shekel’s devaluation, although this is a more secondary factor. The data from China also does not add health to the global economy, and is therefore also received negatively both in the Asian markets (and abroad in general) and here. In this situation, in view of the many factors of uncertainty, the shekel will have difficulty finding direction in the foreseeable future.”
Menachem concludes by noting sharp volatility in all directions is the new normal, and is expected to accompany us in the coming period.
Published by Globes, Israel business news – en.globes.co.il – on July 17, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.
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