Despite Israel remaining on edge following Iran’s vow to avenge the assassination of Hamas political leader Ismail Haniyeh in Tehran last week, the shekel made sharp gains today. The day’s gains cap a week of shekel weakness that saw the Israeli currency trade at its weakest level against the U.S. dollar since November 2023.
The Bank of Israel set the shekel-dollar exchange rate this afternoon, down 1.535% compared to Tuesday’s rate, at NIS 3.784/dollar, and the shekel-euro exchange rate down 1.403%, at NIS 4.133/euro.
Energy Finance CEO Yossi Frank explained that the shekel rose today for two reasons. The first is the “realization in the markets that the Iranian response is unlikely to be strong,” and thus the level of anxiety among investors is reduced. “In addition, yesterday’s rise in exchange rates is now leading to rapid profit-taking.”
Frank adds that the strengthening of the shekel also stems from the understanding that the Bank of Israel is closely monitoring the foreign exchange market. “The market understands that the bank will wake up and intervene,” he said.
So far, the Bank of Israel has sold only about $8.5 billion of its foreign currency reserves to support the shekel, and has not intervened since November. Frank expects the shekel to rise to 3.4-3.5 shekels to the dollar after the war ends. “That’s its natural level, and that’s the threshold we’ll reach when the market realizes the war is over.”
This article was published in Globes, Israeli Business News – en.globes.co.il – on August 7, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.