The dollar weakened against the shekel by 0.7% and traded at a rate of NIS 3.2639 for the currency. On the other hand, factors moderate the escape to it as a safe asset in a period of volatility and uncertainty, such as the large increases on Wall Street yesterday and the Russian Foreign Minister’s statement that there is “hope for compromise” with the Ukrainians in talks resumed tomorrow (while the attacks worsen). Against the dollar.
Interest rate hikes in the United States have already been priced into the dollar, according to market economists, although the route of the hikes (in number) has declined due to the war. In principle, raising interest rates should strengthen the currency, since its role is to moderate the inflation that erodes its value (it also has the power to reduce demand for products because of their price, but also to increase demand for the currency itself, because products and services continue to buy higher).
And while the strengthening of the dollar also due to the Fed’s interest rate hike (in a decision to be made tomorrow) the market has already digested, the propaganda was that it would open a gap between the interest rate in the United States and that in Israel, meaning that the central bank would wait more than one. Such a gap should work in favor of the dollar.
But yesterday, the consumer price index was published in February in Israel, which showed an increase above expectations of 0.7% over January, and inflation of 3.5%. Now, according to estimates, the Bank of Israel will not delay and already at the next meeting on April 11, they will raise the interest rate in Israel, which means that the interest rate gap will not open for a long time at all.
Even before the index was published, Leader Capital Markets mentioned earlier this week that in Israel the current account surplus reached $ 22.5 billion (4.7% of GDP) in 2021, with an acceleration in the fourth quarter (6.6 billion) and in addition net real investments reached 4.1% of GDP ( 19.9 billion). “The basic factors continue to support a strong shekel.”
In the wake of yesterday’s gains in the United States, Yossi Freiman, CEO of Frico Risk Management, Financing and Investment, wrote: “H”.
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