The dollar / shekel continues to zigzag, amid interest rate announcements from central banks around the world: and today, the US currency is soaring to NIS 3,133. The euro earlier jumped to NIS 3,550, and is now trading at NIS 3,523. The pound jumped earlier to NIS 4.16 and is now trading at NIS 4.146. In world markets – the dollar strengthens slightly compared to the basket of 6 major currencies.
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Yesterday the Bank of England surprisingly raised interest rates, and is the first of the leading banks in the West to do so. Moreover, the US Federal Reserve plans to raise interest rates as early as March 2022, and twice more later this year.
Yossi Freiman, CEO of Frico Risk Management, Financing and Investments: “Following the decision of the US Federal Reserve not to change the dollar interest rate, but to declare the intention to raise the interest rate upon return to full employment and to significantly reduce bond purchases today – announced The Bank of England has decided to raise the pound sterling interest rate by 0.15% to 0.25%. In our opinion, the Bank of Israel is not expected to act before the rise in the dollar interest rate. “
Nadav Ofir, Global Markets Strategist at Bank Hapoalim’s Chamber of Commerce: “In light of the Fed’s interest rate announcement and surprise in the UK, central banks seem to be signaling to the market that they attach great importance to inflation and will try to bring it back to reasonable levels by using interest rate tools. “And implement their plan to complete the quantitative easing faster (in the United States) and even begin the process of raising interest rates, as we see in the UK.”
Bank Hapoalim: “Central banks are changing the disk – broadcasting to the market because they attach great importance to inflation”
The foreign exchange experts of the Swiss bank, which specializes in private banking, Lombard Odier: “We expect the shekel to continue to strengthen, and to perform exceptionally well. The healthy balance of payments of the shekel stabilizes it as a currency with excellent performance in both 2020 and 2021. Although Israel as a country has low yields, the overall demand for the shekel was extremely strong in light of Israel’s strong excess of payments and the direct flow of foreign money to the country. These conditions are a function of strong export of services, especially in the field of technology, and an increase in the volume of gas exports, which is expected to continue to grow in the coming years. ”
Bloombard Odeier added that “what has recently slowed the shekel’s appreciation is another acquisition of dollars by the Bank of Israel. While dollar purchases were extensive and pre-communicated before the beginning of 2021, both growth and inflation were strong. -2% this year, and GDP is expected to reach 5% in 2022. This means that the Bank of Israel has less incentive to pursue a flexible monetary policy. “The Bank of Israel has already begun to reduce its bond purchase plans and reduced its dollar purchases. We expect the shekel to remain strong in the near future – there is little chance that this forecast will not materialize if we see a sharp rise in US bond yields and an unusual correction of technology stocks.”
The Economics Division of Leumi’s Capital Markets Division, headed by Dr. Gil Michael Befman: “Although moderated slightly in the third quarter of 2021, the current account surplus remains at a very high level, which continues to support the strength of the shekel: S) show that the current account surplus of the balance of payments in the third quarter of 2021 amounted to about $ 4.9 billion (seasonally adjusted figure at current prices). This is a slightly lower figure compared to the first two quarters of the year, which recorded a surplus of about 5.4 billion $ And about $ 5.5 billion, respectively. ”
Leumi “estimates that in a key scenario, the current account surplus is expected to continue to moderate gradually in the coming quarters, against the background of continued expansion of economic activity in the economy, with an increase in imports, and return to activity of industries not yet recovered from the crisis.” The spread of the Omicron variant around the world has expanded the list of countries defined as ‘red’, which may delay the recovery process of imports and exports of tourism services of the economy. “After 2020, it amounted to a more significant surplus of about 5.5% of GDP in the current account. That is, it is a situation that is expected to continue to support the strength of the shekel.”
Turkish low
The dollar jumped another day against its Turkish counterpart, trading at its peak for 17.14 Turkish lira. In the background, Turkish leader Recep Tayyip Erdogan continues to bend the central bank – yesterday the bank cut interest rates in the economy to 14% from 15%, sending the local currency at the worst rate ever – to 15.5 pounds to the dollar.
The currency has fallen by more than 50% since the beginning of the year. The inflation rate in Turkey is climbing to 21%. Erdogan even announced in a speech yesterday, apparently in response to a fall in the currency, that he would raise the minimum wage in the country by 50%.
The Turkish president refuses to raise interest rates to he claims to encourage economic growth and job creation. This is despite a desperate call from investors and economists towards Erdogan to reverse his decision. He continues to refuse on the grounds that higher interest rates will result in a higher inflation rate, which does not actually happen.
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