In recent days, the shekel has weakened against the dollar from a level of 3.36 shekels to a level of 3.55 shekels, but today it is strengthening to 3.5 shekels per dollar. Many commentators were quick to attribute this to the process of the legal revolution and announcements by many parties about withdrawing their investments in Israel, or to signs of recession. But it turns out that was not the reason.
To check if the shekel is indeed decreasing due to factors originating in Israel, the situation of the US dollar in relation to the euro must be checked. We will check the ratio on the days indicated in the table at 21:00:
It is clear from the table that only 0.7% of the total devaluation of 3.5% is explained by factors originating in Israel, while the rest is explained by the ratio between the euro and the dollar. It is true that Israel is an “economic powerhouse” but it is difficult to assume that what is happening in Israel affects the Euro/Dollar ratio. The opposite, then, is more likely.
Therefore, the expectation of the behavior of the shekel/dollar ratio will be greatly influenced by the expectation of the euro/dollar ratio. The leaders of the European Union believe that there will be no recession in the European Union, while the consensus is that a recession in the US is inevitable. If these expectations come true, the euro will strengthen against the dollar and the shekel will also strengthen relative to the dollar.
Let’s break it down:
In the short term, the ratio of the euro to the dollar will be affected by the ratio of interest rates. While in the US it is quite clear that the trend of raising the federal interest rate will continue even if publication The American index today at 15:30 It will be as expected (a monthly increase of about 0.46%) because the European Union adopts a similar policy, albeit with a certain lag.
The conclusion is this: therefore, whenever it is announced that the US Federal Bank has raised the interest rate, there will be an immediate reaction of the strengthening of the dollar. It is possible that the strengthening of the dollar yesterday is due to this. On the other hand, in the long term, the economic growth rate will be the main factor that will affect the relationship between the euro and the dollar. At this point, the Eurozone has not been able to improve its growth rates and the bloc is still trying to deal with the damage of Brexit from the UK.
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