Dollar Strengthens Against Shekel Ahead of Key Global Interest Rate Decisions
The Israeli shekel weakened at the start of the new year, with the dollar rising above 3.04 shekels, a 0.3% increase in the local market. This comes as the dollar shows moderate strength globally, alongside significant oil price hikes. The euro saw a slight movement, trading above 3.52 shekels.
Globally, the dollar index climbed 0.2% to 99.3 points against major currencies. The euro dipped 0.3% to trade above $1.15, and the British pound fell 0.1% to around $1.35. In Japan, the dollar appreciated by 0.3% to 154.0 yen.
This week is pivotal for monetary policy. On Wednesday, the US Federal Reserve is expected to announce an interest rate hike, with markets pricing in an 86% probability of a rise from 3.75% to 4%, following five meetings without change. Further increases are anticipated later in the year.
On Thursday, the Bank of England will announce its interest rate decision. Forecasts suggest the rate will remain unchanged at 3.75%, though a significant minority may support an increase. On Friday, Japan's central bank is expected to raise its interest rate due to rising inflation, which stood at 1.9% in July.
Shane Oliver, Chief Economist at AMP, noted that the Fed might delay a decision but faces complications due to the proximity of its October meeting to US midterm elections, while waiting until December might be too long. ING analysts believe a rate hike would be welcomed by the dollar, bolstering the Fed's credibility, but do not expect excessive strengthening, viewing it as a policy adjustment rather than the start of a new hiking cycle.
