Economists: Dollar to Strengthen, Shekel to Strengthen Even More

The dollar continued to sink against the shekel over the past week. The dollar closed at NIS 3.539 on Thursday, and experts expect it to continue falling if the Bank of Israel continues its new non-intervention policy, with levels as low as NIS 3.40/dollar possible.

However poorly the dollar is doing against the shekel, however, European currencies are faring even worse. The pound sank a full 2 percent Thursday against the shekel in the wake of the results of the U.K. election, closing at NIS 4.579. The euro closed 0.5 percent lower, at NIS 3.975, while the Swiss franc was down 0.4 percent, trading at NIS 3.66.

Economists quoted by TheMarker said that the dollar was likely to strengthen against European and Asian currencies in the near term, as the U.S. increases interest rates. However, that does not necessarily mean that the shekel will weaken. According to the economists, the strength of the shekel is due to three factors: the increased supply of foreign currency due to increased sales of natural gas, exits of high-tech companies that bring in foreign currency, and the significant growth of the Israeli economy.

The best that Israelis who prefer a weaker shekel — like exporters — expect is a slowdown of the pace of the shekel’s strengthening against the dollar, and a stabilization of the exchange rate somewhere between NIS 3.4 and NIS 3.5. The weak dollar has made life difficult for exporters, who get fewer shekels for the dollars they bring in from abroad as the value of the Israeli currency rises, with the glut of dollars that flood the Israeli economy.