On October 19, 1995 the Bank of Israel set the shekel-dollar exchange rate at NIS 2.991/$. The following day the rate was set at NIS 3.02/$. Since then the Israeli currency has never fallen below NIS 3/$ but the way things have been going over the past month, breaking that 26 year record looks closer than ever.
Earlier today the Bank of Israel set the representative shekel-dollar rate down 0.518% at NIS 3.074/$ and the shekel-euro rate was set down 1.050% at NIS 3.477/€.
How to invest as the shekel strengthens
The shekel has been strengthening consistently against the world’s major currencies since the financial crisis in 2008, despite the Bank of Israel buying more than $200 billion in foreign currency to moderate the appreciation of the shekel and help exporters. The pace of the shekel appreciation has picked up over the past few years and has intensified over the past month.
Last month on October 27, the shekel-dollar rate fell below the important psychological threshold of NIS 3.20/$ and over the past two weeks the shekel has strengthened by a further 5% against the dollar and by considerably more against the euro and sterling.
What has caused this latest appreciation? There are many contributing factors – Israel’s current account surplus, booming tech sector and investments in Israel, the need by Israeli institutions to buy shekels as a hedge for their foreign currency exposure on rising foreign stock exchange investments, and Israelis are traveling abroad in much smaller numbers with no need to buy foreign currency.
On top of all this there were the protocols of the last Bank of Israel Monetary Committee interest rate decision published on October 21 and the State Comptroller’s harsh criticism of the large amount of foreign currency that the Bank of Israel has been buying published on October 19.
Then on Monday the strengthening of the shekel received further support from the unexpectedly low 0.1% rise in the October Consumer Price Index (CPI) making a rate hike even less likely. Senior analysts insist that the current shekel gains are exaggerated but such comments do not seem to influence the forex market.
Unless something unexpectedly significant happens very soon, the shekel will return to its 1995 levels, perhaps even this month.
Published by Globes, Israel business news – en.globes.co.il – on November 17, 2021.
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