Israeli Shekel Shows Strength Amid Global Dollar Surge
Translated & summarized from Calcalist by baba
The Israeli shekel is strengthening against the US dollar, reaching 3.082 shekels, despite the dollar hitting a 1.5-year high globally. This is attributed to hedging by Israeli institutional investors, counteracting global trends favoring the dollar. Key upcoming events, including inflation data and the Bank of Israel's interest rate decision on October 21st, will influence future currency movements.
The story in 6 lines · by baba
- The Israeli shekel is strengthening against the US dollar, trading at 3.082 shekels.
- The US dollar has reached a 1.5-year high against a basket of global currencies.
- Hedging activities by Israeli institutional investors are a key factor supporting the shekel.
- US interest rates are expected to remain high, typically strengthening the dollar.
- Upcoming inflation data and the Bank of Israel's interest rate decision on October 21st will impact the currency.
- The euro is trading near a 17-month low against the dollar.
The Israeli shekel is demonstrating unusual strength against the US dollar, trading at 3.082 shekels to the dollar, despite the dollar's global ascent to a 1.5-year high against a basket of major currencies. This resilience in the shekel is occurring even as expectations grow for an interest rate cut in Israel, while US interest rates are anticipated to remain high.
Globally, the dollar has strengthened significantly due to expectations that the US Federal Reserve will maintain high interest rates for an extended period, coupled with attractive yields on US Treasury bonds. These factors typically encourage investment in dollar-denominated assets, pushing the dollar higher against other currencies. Geopolitical risks and rising energy prices have also contributed to the dollar's strength.
However, the shekel's performance is influenced by unique domestic factors. Ran Sinai, Chief Economist at Ultra Finance, points to hedging activities by Israeli institutional investors as a key reason for the shekel's strength. When their overseas investments increase in value, these institutions may sell dollars to maintain their desired hedging ratios, thereby increasing demand for shekels.
Looking ahead, the shekel's trajectory will likely be shaped by upcoming economic data and policy decisions. The publication of September's consumer price index and the Bank of Israel's interest rate decision on October 21st are critical. If inflation surprises to the downside and the Bank of Israel cuts rates, the dollar could rise to 3.08-3.12 shekels. Conversely, if the interest rate remains unchanged and institutional hedging continues, the shekel may maintain its strength, with the dollar potentially trading between 3.02-3.06 shekels.
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