The shekel is weakening today against the dollar and against the euro. In afternoon inter-bank trading, the shekel exchange rate is up 0.80% against the dollar at NIS 3.221/$ and up 0.56% against the euro at NIS 3.679/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.125% from Friday, at NIS 3.195/$, and the representative shekel-euro rate was set 0.273% lower at NIS 3.658/€.
The shekel is trading at its weakest (highest) exchange rates against the dollar and euro since October 2021. While stock markets have been relatively stable in recent days, it is the expectation of a wider interest gap between the shekel and other currencies that is weakening the Israeli currency. Bank of Israel deputy governor reiterated to "Globes" the central bank's forecast that there is no need to raise the rate this year, or at most from its historic low of 0.1% to 0.25%.
He commented, "What we see around the world is that there is a difference in how countries are coming out of the crisis. The biggest differences between countries that is influencing their policies is inflation. There are countries in which inflation has exceeded the target range, and reached 7%, and some of them have already begun raising interest rates, like Poland the Czech Republic, which raised rates by 50 basis points in one go, but this is because inflation exceeded their range. There are countries like China that are going in the opposite direction and cutting rates and easing their monetary conditions. We in Israel are in a somewhat different situation. Our inflation is 2.8% and still within our target range. Even if we see indices that bring inflation above the range, our expectation is that inflation in the second half of 2022 will fall in the direction of the target range."
The depreciation of the shekel has taken place over the past month even though the Bank of Israel only purchased $356 million in foreign currency last month. In 2021, the Bank of Israel bought $35 billion in foreign currency in efforts to moderate the strengthening of the shekel.
Published by Globes, Israel business news - en.globes.co.il - on February 8, 2022.
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