Dollar Fluctuates Against Shekel After Mixed US Economic Data

The US dollar experienced volatility against the Israeli shekel, trading above 3.07 shekels following a mixed batch of US macroeconomic data. Globally, the dollar index against major currencies dipped 0.2% to 101.2 points, while the euro rose 0.5% to over $1.13 and the British pound gained 0.2% to just under $1.33. The dollar also weakened 0.2% against the Japanese yen, trading at 156.9 yen.

The mixed US economic indicators included a surprising slowdown in private consumption expenditures for August, a key inflation gauge for the Federal Reserve. This was contrasted by stronger-than-expected economic growth in the second quarter and a significant rise in private sector jobs in September. The official exchange rate for the dollar against the shekel was set at 3.063 shekels.

Yossi Menashe, co-founder and CEO of Altshuler Shaham Financial Services, noted that markets are reacting to US inflation data with yields still high, while the dollar maintains relative strength. He pointed to early signs of moderation in the labor market, including fewer job openings and weakening consumer confidence. Menashe highlighted the upcoming Personal Consumption Expenditures price index as particularly significant, potentially indicating whether the market will price in continued tight interest rates or a slowing economy.

Menashe added that recent oil price drops offered some relief to inflation pressures but were insufficient to alter the broader picture. With 10-year US Treasury yields around 5.24%, the dollar benefits from yield differentials and the US economy's resilience. He suggested that lower-than-expected inflation data could ease yields and the dollar, while higher figures might quickly reintroduce pressure on the bond market.

Regarding the dollar-shekel specifically, Menashe stated that trading around 3.07 reflects the dollar's global strength and high US yield environment. He also acknowledged the impact of energy market developments and Middle East events on risk premiums and inflation expectations, suggesting the shekel will remain sensitive to US macro data and bond market movements.

In related news, New York Fed President John Williams indicated that a rapid interest rate hike is not necessary, suggesting the Fed has time to gather more data before its October meeting. This statement led to a sharp decrease in market expectations for a rate hike next month. Williams also suggested a potential rate increase later in the year, contingent on economic developments aligning with his forecasts, while clarifying this was his personal view.