Shekel Weakens as Dollar Tops 2.91 Shekels After Soft Inflation Reading

The Israeli shekel fell on Tuesday morning in local foreign exchange trading, reversing gains from the previous day that came after news of a peace agreement between the United States and Iran and the release of inflation data. The dollar also recovered slightly in global markets after slipping on Monday to a 10-day low.

In Israel, the dollar rose 0.5% to 2.917 shekels. The euro gained 0.3% to 3.378 shekels, and the pound climbed 0.2% to 3.909 shekels. Abroad, the euro slipped 0.1% against the dollar to $1.158, the pound weakened 0.2% to $1.34, and in Japan the dollar was unchanged at 160.26 yen. The dollar index, which tracks the currency against a basket of major peers, advanced 0.1% to 99.51 points.

Israel’s consumer price index fell 0.3% in May from the previous month, slightly more than economists had expected, with forecasts calling for a decline of 0.1% to 0.2%. That left annual inflation at 1.9%, matching April’s pace and coming in below expectations of 2%.

Ronen Manhem, chief markets economist at Mizrahi Tefahot Bank, said the softer reading could help the Bank of Israel if it considers another rate cut in the coming month. He added that the stronger shekel will also affect inflation with a delay, but said policymakers still need to watch the housing component closely because it accounts for about a quarter of the index and continues to push overall inflation higher. Housing costs in the index rose 0.6%, with rents up 2.5% for tenants who renewed leases and 6.8% for new renters.