Exchange Rate Falls Below 3.70 Threshold, Turnaround Foreseen

The months-long surge of the shekel has taken it across the 3.70 threshold of the dollar/shekel exchange rate.

As of Tuesday evening in Israel, the shekel-dollar exchange rate had fallen to 3.6910, the lowest in two-and-a-half years. The exchange rate for the euro was at 3.8995/€, a 15-year low.

Although the rate continued to fall through Tuesday, analysts cited by Globes were saying that the trend would burn itself out and even reverse before long.

“In a couple of more months the expectations are that the interest-rate gaps between Israel and the U.S. and Europe will open up more, and that could halt the huge appreciation of the shekel and even turn things around completely,” said Yaniv Hevron, research chief at Excellence Investments.

The Bank of Israel is expected to intervene to weaken the shekel by purchasing foreign currency, as it has done many times in the past, Globes said. The Bank currently holds an unprecedented $101.608 billion in foreign currency.

FXCM Israel said on Tuesday morning: “The shekel-dollar exchange rate is still exposed to continued falls and is at its lowest level since October 2014, and it may be that the two currencies will bottom out at this psychological level. Such a low level poses a problem for Israel’s economy because it harms the competitiveness of Israeli exporters. The Bank of Israel has intervened in trading in recent weeks and will possibly be required to intervene again to halt the downward slide.”