Dollar Surges Against Shekel Amid Global and Local Uncertainty
Translated & summarized from Globes by baba
The Israeli shekel weakened against the US dollar, reaching NIS 3.22, driven by sharp declines in US stock markets and local political uncertainty. Experts cited global market trends and Israel's perceived declining international standing as key factors. While immediate impacts of halted US aid are considered minor, future government policy and potential diplomatic advancements like expanded Abraham Accords could influence the shekel's trajectory.
The story in 6 lines · by baba
- The dollar briefly surged to NIS 3.22 against the shekel, a level not seen since December.
- Global market declines in the US, with major indices falling 4-5%, fueled the dollar's rise.
- Local political uncertainty surrounding Israeli government formation also weakened the shekel.
- Experts noted an increase in Israel's risk premium due to its perceived diminished standing in the US.
- Potential expansion of Abraham Accords with Saudi Arabia could strengthen the Israeli economy and shekel.
- Stabilization of global markets and clarity on Israeli government formation may calm the currency market.
The Israeli shekel weakened against the US dollar on Thursday, with the dollar briefly trading at NIS 3.22, a level not seen since December. This rise was attributed to a global trend of sharp declines in US stock markets, where major indices dropped 4-5%. Edith Moscovitz, Head of Capital Markets and Foreign Exchange Trading Rooms at Bank Leumi, explained that a fall in US markets prompts the transfer of dollars abroad for collateral, increasing demand for the dollar against the shekel. This dynamic offers Israeli investors exposed to the dollar a natural hedge against losses.
Beyond global market volatility, local political uncertainty surrounding the formation of a new Israeli government following recent elections also contributed to the shekel's weakness. Moscovitz noted that the US midterm election results, which reportedly showed animosity towards Israel and led to the premature cessation of US aid, further exacerbated this. Moody Shprir, Chief Strategist of Financial Markets at Bank Hapoalim, added that Israel's risk premium has increased due to a perceived erosion of its standing in the US and the possibility of further elections in Israel.
Shprir, however, downplayed the immediate impact of the halted US military aid, noting it was less than 1% of Israel's GDP and could be offset by strong high-tech performance and tax revenues. The primary challenge for the future government, he stated, is to address the decline in Israel's international standing and prevent more significant sanctions. He also pointed to the potential expansion of the Abraham Accords with Saudi Arabia as a factor that could strengthen the Israeli economy and the shekel.
Harel Dotan, Manager of Derivatives and Foreign Exchange Investments at Menora Mivtachim, highlighted local market uncertainty, which has erased year-to-date gains in the Tel Aviv Stock Exchange. He also cited global concerns in the tech sector, particularly around AI investments and profitability, as contributing to dollar strength. Dotan suggested that a clearer picture of government formation and a stabilization of global markets could help calm the local currency market.
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