Shekel gains on dollar despite Fed rate hike

The shekel is strengthening today against the dollar and weakening against the euro. In early afternoon inter-bank trading, the shekel exchange rate is down 0.33% against the dollar at NIS 3.416/$ and up 0.24% against the euro at NIS 3.486/€.

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

The shekel is strengthening against the dollar today, even though the US Federal Reserve raised the interest rate yesterday by 0.75%. This was the fourth Fed rate hike of the year, and the second successive 0.75% hike, bringing American rates to between 2.25% percent and 2.5%. This is double Israel’s rate of 1.25%, despite three rate hikes by the Bank of Israel this year. However, despite the widening interest rate the shekel is strengthening against the dollar today and dollar is also weakening against the euro.

Clearly forex markets had already priced in another aggressive Fed rate hike, while US Federal Reserve chair Jerome Powell’s comments that the Fed could slow the pace of its hikes also had their effect.

Powell’s words boosted the markets on Wall Street and the shekel seems to have been more influenced by the sharp gains in stock prices. These gains meant that Israeli institutional investors have needed to sell foreign currency to hedge their overseas positions.

The shekel has been gradually strengthening this month from NIS 3.526/$ at the start of July, mainly due to the modest stock market recovery on Wall Street.

Published by Globes, Israel business news – – on July 28 2022.

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

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