Shekel-Dollar Exchange Rate Hits Three-Year Low

FXCM Israel said on Wednesday morning, “Despite the fact that there was no official trade on Tuesday, Israeli Independence Day, the shekel-dollar rate dropped to a new low, due to the general weakening of the dollar in global markets.

“The shekel-dollar exchange rate is being traded at its lowest rate since August 2011. It seems that sentiments regarding the dollar are at a low, and, yesterday, the dollar index dropped to its lowest rate in half a year. Despite the impressive employment figures published on Friday in the U.S., it seems that the market simply does not believe that the Federal Reserve Bank will raise interest rates in the near future, and this causes the dollar to become an asset with no future potential return … Only when the uncertainty regarding the upcoming policies of the Federal Bank is clarified will the dollar be able to stabilize.”

Currently,  according to FXCM, investors are waiting to see how the Bank of Israel will act. It is safe to assume that market headlines will again begin focusing on the exchange rate, and its negative impact on the economy.

“In the last policy meeting, the bank decided not to reduce interest rates, but, if the dollar continues to crash in global markets and against the shekel, the Bank of Israel will be forced to consider another interest-rate reduction. A continued drop in the shekel-dollar exchange rate will cause the Bank of Israel to get massively involved in the foreign currency market in order to attempt to stem the tide and prevent a crash in the exchange rate.”

This article appeared in print on page 7 of the May 8th, 2014 edition of Hamodia.