The US dollar and the euro continue to demonstrate strength against the shekel, with the dollar climbing to around NIS 3.171, approaching its peak level since the end of March. In doing so, the American currency has erased nearly all of the shekel's appreciation trend from the spring months, when it traded at a low of approximately NIS 2.811. The euro is also showing strength, trading at around NIS 3.551.
The sharp shift in the local foreign currency market is particularly prominent against the backdrop of global developments: While the global dollar index weakened by about 0.3% to a level of 101.5 points, the Israeli currency experienced broad-based weakening. This figure clearly indicates that the current reasons for the depreciation are primarily local.
At the center of the pressure are the election results and the lack of a clear outcome, which are currently being priced into the markets as a scenario of a prolonged transition government with questions surrounding the budget and deficit. Foreign investors are reacting by demanding a higher risk premium on Israeli assets. Concurrently, declines in futures contracts in New York are leading institutional entities to execute hedging adjustments and purchase dollars.
Compounding this are interest rate differentials: While the Bank of Israel reduced its interest rate to 3.25%, the US Federal Reserve raised its rate to 3.75%-4%, which harms the attractiveness of holding shekels. This development puts the Bank of Israel in a complex situation ahead of its upcoming interest rate decision on November 23.