Dollar Strengthens Against Shekel Amid Global Tensions

The Israeli shekel experienced a slight decline at the start of the trading week, as the US dollar saw modest gains globally and locally. The dollar strengthened by 0.3% against the shekel, trading above 3.05 shekels. The euro also rose by 0.2%, trading just below 3.48 shekels.

Globally, the dollar index, which tracks the dollar against a basket of major currencies, increased by 0.2% to 101.1 points. The euro remained relatively stable against the dollar, trading just below $3.14, while the British pound weakened by 0.1% against the shekel, trading above 1.32 shekels. In Japan, the dollar gained 0.3% against the yen, reaching 157.8 yen.

The currency market movements are occurring against a backdrop of heightened geopolitical tensions. Reports indicate that US President Trump rejected an updated settlement offer from Iran aimed at ending the conflict and reopening the Strait of Hormuz. According to the Wall Street Journal, Trump informed his advisors that he anticipates a renewal of US strikes in Iran after the November midterm elections. Oil prices have risen by over 1% in response to these developments.

Sim Moh Siong, a currency strategist at OCBC Bank, noted that the dollar might strengthen beyond levels justified by economic data in the short term if energy market tensions persist and inflation risks grow. OCBC, a major Singaporean bank, maintains a base scenario of moderate dollar strengthening through the end of the year.

Investor attention this week will focus on upcoming US economic data. The Personal Consumption Expenditures (PCE) index for the second quarter is due Wednesday, and the September jobs report will be released on Friday. Both are expected to support continued monetary policy tightening by the Federal Reserve. Markets currently price in a 65% chance of an interest rate hike at the Fed's next meeting on October 28.