Shekel weakens against dollar after Fed rate hike

0

The shekel is weakening today against the dollar and stabilizing against the euro. In afternoon interbank trading, the shekel exchange rate was up 0.29% against the dollar at 3.437 NIS/$ and 0.07% against the euro at 3.480 NIS/€.

Yesterday, the Bank of Israel set the representative shekel-dollar rate at 0.522% from Tuesday at 3.427 NIS/$, and the representative shekel-euro rate was set at 0.327% at 3.478 NIS/€.

The shekel weakened against the dollar today, after the US Federal Reserve raised its interest rate by 0.75% yesterday. It was the Fed’s fourth rate hike of the year and the second consecutive hike of 0.75%, taking US rates to between 2.25% and 2.5%. This is double the Israeli rate of 1.25%, despite three rate hikes by the Bank of Israel this year. Following the widening of interest rates, the shekel is strengthening against the dollar today.

Clearly, currency markets had already priced in another aggressive Fed rate hike, while comments from US Federal Reserve Chairman Jerome Powell that the Fed may slow the pace of its hikes also tempered the strengthening dollar.

Powell’s words boosted markets on Wall Street, and the shekel’s only moderate weakening appears to have been influenced by strong stock price gains as well. These gains mean that Israeli institutional investors have had to sell foreign currencies to cover their positions abroad.

The shekel has gradually strengthened this month from NIS/$3.526 in early July, mainly due to the modest stock market rally on Wall Street.

Published by Globes, Israel business news – en.globes.co.il – on July 28, 2022.

© Copyright Globes Publisher Itonut (1983) Ltd., 2022.


Share.

About Author

Comments are closed.