After reaching its strongest levels in two years yesterday against the dollar, the shekel is weakening today against the US currency, despite its strength against the euro. In morning interbank trading, the shekel exchange rate against the US dollar rose by 0.36%, reaching 3.554 shekels/dollar, and the shekel-euro rate rose by 0.01%, reaching 3.696 shekels/euro.
Yesterday, the Bank of Israel set the shekel-to-representative dollar rate 1.172% lower than on Tuesday, at NIS 3.541/$ – the strongest since February 2023 – and the representative shekel-to-euro rate was set 0.415% lower at NIS 3.696/euro.
Bank of America published its forecasts for the Israeli currency. The bank’s analysts expect the shekel to continue to rise if the ceasefire agreements are fully implemented: “The recent ceasefire agreements in the Israeli region have contributed to the strengthening of the shekel. If these agreements are fully implemented and become permanent, we may see further appreciation.” The Bank of Israel’s plans so far indicate a first rate cut in the third quarter of the year, however, we see an opportunity to postpone it to the second quarter if the ceasefire is maintained.
Bank of America added: “A 1% VAT increase over the next year will keep inflation above the upper end of the target range, but we believe the Bank of Israel may have room for further reduction, if inflation continues to decline suddenly.”
“It is still difficult to see how quickly supply disruptions will be resolved compared to the recovery in demand due to positive sentiment. The Bank of Israel will likely choose to be on the cautious side. We expect two interest rate cuts this year and see a decline in interest rates.” Bank of America noted the risk of another cut if inflation improves faster than expected.
Published by Globes, Israel Business News – en.globes.co.il – on January 23, 2025.
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