UBS expects the value of the Israeli shekel to rise against the US dollar, anticipating a decrease in the geopolitical risk premium.
The shekel briefly surpassed 3.80 against the dollar due to recent tensions between Iran and Israel, as well as the ongoing conflict with Hamas. UBS analysts expect these pressures to ease, paving the way for the shekel to benefit from Israel's economic recovery and the Bank of Israel's prudent policies.
The financial institution expects that the start of the Federal Reserve's monetary easing cycle will further support the shekel's performance. As geopolitical risks ease, UBS expects the shekel to rise, and has announced its forecast for the exchange rate at the end of the quarter.
Expectations indicate a gradual rise in the value of the shekel, as the price is expected to reach 3.60 by the end of the next quarter, followed by 3.50, 3.45, and then stabilize at 3.45 until the first quarter of 2025.
The UBS report highlights the resilience of the Israeli economy, which appears poised to recover from the effects of geopolitical events that have recently weighed on currency fluctuations. The shekel's expected gains reflect confidence in the country's economic management and the expected shift in US monetary policy.
The future outlook for the shekel is based on the assumption that the risk premium, which has risen due to recent confrontations, will decrease over time. This reduction in risks is expected to be the main driver of the shekel's strength in the coming quarters.
In conclusion, the UBS analysis points to a brighter future for the Israeli shekel, supported by a strong economic recovery and favorable monetary conditions.
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