Shekel Weakens as Security Situation Heats Up

Not surprisingly, the launch of IDF Operation Protective Edge has already had economic repercussions.

The shekel has weakened against the dollar on Tuesday, as the security situation in the south of Israel escalated overnight, Globes reported.

The shekel-dollar rate is up 0.23% in comparison with Monday’s representative rate, at NIS 3.4285/$, and the shekel-euro rate is up 0.13%, at NIS 4.6594/€. The stock market is also down, with the Tel Aviv 25 Index currently off 0.58%.

Nobody is panicking, though. Analysts and investors remained in a watchful waiting mode.

Prico CEO Yossi Fraiman said in his market review, “Because of the security escalation and the fact that many market players have left for summer vacations leading to low trading volumes, there is potentially greater volatility. In our view, on the basis of past experience, the market tends to respond to events of economy-wide significance, and so as long as events continue to have no significance for the economy as a whole and do not shut down activity in any substantial way, the foreign exchange market can be expected to continue to behave tensely, waiting on developments, with players tending to avoid excessive exposure to the effect of events in the security arena.”

Fraiman estimates that, given the high level of intervention by the Bank of Israel as the shekel appreciated toward the NIS 3.4/$ level, in the short term, the central bank will continue to maintain the NIS 3.4-3.42/$ range as a defensive line against a repeat of the sharp appreciation seen in the summer of 2011, when the shekel-dollar rate reached NIS 3.35-3.38/$.

This article appeared in print on page 8 of the July 9th, 2014 edition of Hamodia.