Unfazed by the first quarterly contraction in Israel’s economy since 2009, much of which being blamed on the 50 day Gaza battle against Hamas militants during the Summer which naturally put a mild brake on sectors of Israel’s 291.4 billion dollar economy — the Bank of Israel has left the December interest rate at 0.25%. Trading in the shekel was mixed on Monday’s opening, as reported by Globes.
The dollar-shekel rate is currently up 0.65% in comparison with Friday’s representative rate, at NIS 3.8578/$, while the euro-shekel rate is down 0.56%, at NIS 4.7817/€. Aside from companies publicly voicing a bit of discomfort with the stronger shekel of the past year and last quarter’s (September) surprise rate cute… the main reason for the shekel’s further weakness against the US dollar is estimated to be the downgrading by Fitch of its long term credit rating outlook for Israel.
FXCM Israel said in its market review Monday morning, “The shekel is collapsing because of Fitch’s announcement of a downgrade of its rating outlook for Israel from ‘positive’ to ‘stable’. This negative announcement, which represents a warning signal for investors and foreign currency traders, led to a further sell-off of the shekel, which in fact began on Friday. In current condition, the shekel-dollar rate could climb to NIS 3.9/$ even before the end of the year.”
ILS has depreciated since of August, when the Bank of Israel reduced interest rates 25 basis points for September. These internal actions parallel to a broader USD rally has seen the shekel weaken against the dollar from it’s previous comfy 3.5 handle.
The review went on to say: “Despite the peak rates at which the shekel-dollar pair is traded, and after the uninhibited rally of the past few months, those holding long positions on the dollar against the shekel are not rushing to take profits. Nor are traders daring to go against the trend and buy the shekel, even when a technical opportunity arises.”