US Dollar Hits Three-Month High Against Israeli Shekel Amid Rate Decision Uncertainty

The Israeli shekel weakened against major currencies on Wednesday amid heightened security tensions with Iran and anticipation of the US Federal Reserve's interest rate decision. The US dollar rose to approximately 3.08 shekels, marking its highest level since early April, with the official representative rate set at 3.058 shekels. Meanwhile, the euro traded around 3.50 shekels, slightly above its official rate of 3.483 shekels.

The Federal Reserve is expected to conclude its two-day meeting Wednesday evening at 21:00 Israel time, with markets largely anticipating no change in interest rates. However, futures markets remain volatile, assigning about a 64% probability to maintaining current rates and a notable 36% chance of a surprise hike, according to CME Group's FedWatch tool.

Market uncertainty stems from conflicting economic pressures in the US. Inflationary risks persist due to geopolitical tensions with Iran affecting energy prices and ongoing supply chain bottlenecks in artificial intelligence sectors. Conversely, recent inflation data shows gradual easing, supported by declining housing costs and reduced tariff impacts. Federal Reserve Chair Jerome Powell has deliberately limited forward guidance to preserve policy flexibility amid internal committee debates on further monetary tightening.

Despite these concerns, leading banks like JPMorgan view a rate increase as unlikely at this meeting, warning it could confuse markets after the previous unanimous decision to hold rates steady and recent moderate inflation figures. New York Fed President John Williams also expressed optimism that inflation has peaked and will continue to moderate.