Dollar Rises Above 3.02 Shekels Ahead of Rosh Hashanah Holiday

The Israeli shekel experienced minor fluctuations against major currencies on Thursday, the eve of the Rosh Hashanah holiday. The dollar strengthened by 0.2% to trade at 3.032 shekels, while the euro saw a 0.1% increase, reaching 3.521 shekels. The British pound also recorded a slight rise. Due to Bank of Israel restrictions on trading before the holiday, the exchange rate set on Thursday will remain in effect until Monday.

Globally, currency markets reacted to the European Central Bank's (ECB) decision to raise its deposit facility rate by 25 basis points, from 2.25% to 2.5%. This move, the first rate hike in three years, aims to combat rising inflation in the Eurozone, which reached 3.3% in August, primarily driven by a 14.3% surge in energy prices. The ECB's previous rate decision in July had maintained rates unchanged.

In anticipation of the ECB's move, the euro weakened by 0.1% against the dollar, trading at 1.162 dollars. The pound also lost 0.2% against the dollar, trading at 1.352 dollars. The dollar index, measuring its value against a basket of major currencies, rose by 0.2% to 99.02 points. The dollar also gained 0.5% against the Japanese yen, trading at 154.34 yen.

Analysts noted that while the ECB's rate hike was expected, further increases beyond this point might be counterproductive for the Eurozone economy, especially if inflation remains driven by energy costs. Carsten Brzeski, head of global macro at ING, suggested that the current deposit rate of 2.5% is still within a neutral range for the ECB, and further hikes would signal a shift towards curbing economic activity.