The shekel is strengthening sharply against the dollar and euro today after the strong rise on global stock markets yesterday. In afternoon inter-bank trading, the shekel exchange rate is down 1.22% against the dollar at NIS 3.117/$ and down 0.82% against the euro at NIS 3.523/€.
Yesterday, the Bank of Israel set the representative shekel-dollar rate down 0.190% from Monday, at NIS 3.155/$, and the representative shekel-euro rate was set 0.487% lower at NIS 3.552/€.
Stock markets rose sharply yesterday as concerns about the new Covid Omicron variant waned and the market digested the US Fed plans to examine reducing bond purchasing programs when it meets in mid-December. US inflation figures which will be published at the end of the week will indicate the Fed’s options in executing such plans.
The shekel has been strengthening sharply as Israeli institutional investors are required to buy shekels to hedge their overseas investments when global markets rise. This correlation has been seen clearly over the past year as international markets have risen sharply.
To moderate the strengthening of the shekel the Bank of Israel announced in January that it would buy $30 billion in foreign currency this year. Even though the forex purchasing program was completed in October, it did not stop the Bank of Israel from buying another $4 billion in foreign currency in November, it reported yesterday – a similar monthly amount to the first half of 2021.
Most analysts expect the basic forces supporting the strengthening of the shekel to continue, while the Bank of Israel seems likely to continue buying foreign currency to moderate the appreciation of the Israeli currency.
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