Dollar Hits 18-Month High Globally, Israeli Shekel Remains Stable
Translated & summarized from Ice by baba
The US dollar and euro are trading stably against the Israeli shekel at 3.07 and 3.44 respectively, while the dollar strengthens globally to an 18-month high. The shekel's stability is supported by significant dollar inflows from high-tech, defense exports, and foreign investment, alongside Bank of Israel reserves. Federal Reserve minutes revealed a hawkish stance on inflation, though market expectations for further rate hikes are moderate.
The story in 6 lines · by baba
- The US dollar is trading at 3.07 shekels and the euro at 3.44 shekels against the Israeli currency.
- Globally, the US dollar has reached its highest level in approximately 18 months.
- The shekel's stability is attributed to substantial dollar inflows into Israel's economy.
- Key inflows include revenues from high-tech, defense exports, and foreign investments.
- Federal Reserve minutes indicated a hawkish stance on inflation risks.
- Market expectations for the next US interest rate hike are currently moderate.
The US dollar and the euro are trading with relative stability against the Israeli shekel this morning, with the dollar at 3.07 shekels and the euro at 3.44 shekels. Globally, however, the dollar continues to strengthen, nearing record highs. In Asian trading, the dollar maintained its highest level in about a year and a half, following the release of minutes from the Federal Reserve's (FOMC) meeting. These minutes revealed a hawkish stance, emphasizing that inflation remains the primary risk to the US economy.
Despite the dollar's global strength, the shekel's stability is attributed to a massive and consistent inflow of dollars into Israel's economy. This inflow creates sustained demand for the local currency, offsetting security or political shocks. Key sources of this capital include substantial revenues from the high-tech and defense export sectors, significant foreign investments, and institutional bodies converting billions of dollars into shekels to hedge their overseas investment profits.
As long as the inflow of dollars into Israel exceeds the outflow, and with the backing of the Bank of Israel's substantial foreign exchange reserves, the shekel is managing to maintain its strength against the dollar. The dollar index (DXY), which measures the dollar's strength against a basket of six major currencies, is stable at 102.23, after rising 0.3% the previous day, and is close to its April 2025 peak.
The September Fed meeting minutes, which unanimously decided on a 0.25% interest rate hike, did reveal internal disagreements on the precise rationale. However, most committee members agreed on the need for further monetary tightening and saw a risk of continued price increases. Despite the hawkish tone in the minutes, market expectations for the next interest rate decision remain moderate, with futures pricing only a 19% chance of another quarter-point hike at the upcoming Fed meeting ending October 28.
