Dollar Rises Against Shekel Ahead of Israeli Elections Amid Global Uncertainty
Translated & summarized from Calcalist by baba
The Israeli shekel weakened against the dollar, trading at 3.118 shekels ahead of Tuesday's Knesset elections, as investors weighed political uncertainty. Analysts believe the ability to form a stable government and pass a budget will be crucial for the shekel's performance. Bank of Israel recently held its interest rate at 3.25%, citing inflation and global monetary conditions. Global markets are also anticipating interest rate decisions from major central banks this week.
The story in 5 lines · by baba
- The Israeli shekel weakened against the dollar, trading at 3.118 shekels ahead of Tuesday's elections.
- Market reaction to Israeli elections depends on forming a stable government and passing a budget.
- Polls do not indicate a clear majority, potentially leading to prolonged political uncertainty.
- Bank of Israel recently kept its interest rate at 3.25%, citing inflation and global factors.
- Global investors await interest rate decisions from the US Federal Reserve, ECB, and Bank of Japan.
The Israeli shekel weakened against the dollar on Monday, with the dollar trading at 3.118 shekels, a 0.4% increase. The euro and pound also saw declines against the local currency. This comes as investors brace for the upcoming Knesset elections in Israel, scheduled for Tuesday. Globally, the dollar experienced a slight dip against major currencies, though it strengthened against the Japanese yen. The market is also monitoring developments in Brazil, where President Lula da Silva secured a fourth term after a surprise victory, while his rival, Flavio Bolsonaro, has not conceded.
Analysts suggest that the shekel's sensitivity to political developments and Israel's risk premium is high, especially given the unclear election polls. Yossi Menashe, founder and co-CEO of Altshuler Shaham Financial Services, noted that the lack of a clear majority for any bloc could prolong uncertainty and impact the local currency. Ilan Gildin, partner and hedge fund manager at Carney Family Office, emphasized that the market's reaction will depend not just on the election winner, but on the ability to form a stable government and pass a budget.
Gildin added that a swift resolution leading to a stable coalition and a responsible budget could bolster the shekel and Israeli assets. Conversely, prolonged coalition negotiations or repeat elections could exert downward pressure. He cautioned that immediate post-election market movements are not guaranteed, as current prices may already reflect expectations. The true test for the capital market, he stated, will be the post-election ability to make fiscal decisions rather than remaining in a prolonged state of waiting.
Meanwhile, Bank of Israel recently maintained its interest rate at 3.25%, halting a series of three consecutive cuts. Menashe pointed out that rising energy prices, the weakening shekel, and the global monetary environment limit the scope for further rate reductions. Investors are also awaiting interest rate decisions from the US Federal Reserve, the European Central Bank, and the Bank of Japan later in the week.
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