Israeli Shekel Stable at 3.00 Against Dollar Amid New US Sanctions on Iran
Following the US administration's announcement of new financial sanctions against Iran, currency exchange rates showed minimal movement both locally and globally. The US dollar traded steadily at 3.00 shekels, while the euro hovered around 3.50 shekels. Globally, the dollar index remained stable at 99.0 points against a basket of major currencies, with the euro and pound holding steady above $1.16 and $1.36 respectively. In Japan, the dollar saw a slight increase of 0.2% to 159.3 yen.
Market participants worldwide are awaiting the Federal Reserve Chairman Jerome Powell's speech at the annual Jackson Hole symposium on Friday, which is expected to clarify the Fed's stance on inflation and economic policy. Sim Moh Siong, a foreign exchange strategist at OCBC, noted that uncertainty about the Fed's response to economic developments has heightened anticipation for Powell's remarks.
In Israel, attention is focused on the Bank of Israel's upcoming interest rate decision scheduled for Monday. While many economists predict no rate cut, Meitav's chief economist Alex Zvezhinski argues that the bank is likely to lower rates. He cites Israel's inflation rate dropping to 1.5%, below the midpoint target and the lowest since 2021, with broad-based declines across most index components. Inflation expectations for all terms remain below target, with five-year expectations the lowest among developed countries.
Zvezhinski also highlights the strengthening shekel as a factor contributing to low inflation, noting it has been one of the world's strongest currencies over the past year. He dismisses the argument that current security risks justify a conservative monetary stance, explaining that geopolitical uncertainty only warrants higher rates if accompanied by financial instability such as currency depreciation or rising inflation expectations, none of which are present. Instead, research supports a more accommodative policy as long as inflation expectations remain anchored.
