Israeli Shekel Weakens Against Dollar and Euro, Raising Costs Abroad
Translated & summarized from Maariv by baba
The Israeli shekel has weakened against the US dollar and Euro in the third quarter, making foreign expenses more costly for Israelis. This reversal follows a period of shekel strength that had previously lowered costs for overseas purchases and travel. Institutional investors significantly reduced their foreign currency sales, while banks became net buyers. The shekel's decline is linked to local economic factors, not a general rise in the dollar's value.
The story in 5 lines · by baba
- The Israeli shekel weakened by about 2.9% against the dollar and 2.4% against the Euro in Q3.
- This currency depreciation increases the cost of foreign expenses for Israelis.
- Institutional investors sharply reduced foreign currency sales in the third quarter.
- Banks shifted from selling to buying foreign currency in the third quarter.
- The shekel's weakness is attributed to domestic factors, not dollar strength.
Following a period of currency appreciation that made foreign travel and shopping cheaper for Israelis, the Israeli shekel has weakened. In the third quarter, the shekel depreciated by approximately 2.9% against the US dollar and 2.4% against the Euro. This shift means that expenses incurred in foreign currency may become more expensive for consumers, even if the price of goods or services abroad remains unchanged. For example, a purchase costing $5,000 that was equivalent to 5,000 shekels at the beginning of the period could cost about 145 shekels more by the end of the period due solely to the exchange rate change, before any conversion fees.
Data from the Bank of Israel indicates a significant reduction in foreign currency sales by institutional investors like pension funds, provident funds, and insurance companies. They sold a net of about $4.4 billion in the third quarter, a sharp decrease from the $13.8 billion sold in the previous quarter. Concurrently, the financial sector, primarily banks, transitioned from net sellers to net buyers of foreign currency, acquiring approximately $3.7 billion. Businesses also reduced their net purchases of foreign currency, from $12.1 billion down to $1.7 billion.
The Bank of Israel itself did not engage in net purchases of foreign currency during the third quarter, contrasting with its purchase of about $1.8 billion in the preceding quarter. The weakening of the shekel is attributed to domestic factors rather than a broad strengthening of the US dollar, which actually lost value against several other currencies during the same period. For instance, the dollar weakened by about 12.4% against the South Korean won, 3.3% against the Japanese yen, and 3% against the Norwegian krone. However, the shekel was not alone in weakening against the dollar; the dollar also strengthened against currencies such as the Hungarian forint, Mexican peso, and Swedish krona.
