Shekel Strengthens Despite Bank of Israel's Interest Rate Cut
Shekel gains sharply despite interest rate cut
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The Bank of Israel's recent interest rate cut did not halt the shekel's appreciation, which strengthened by 1.651% against the dollar and 1.571% against the euro. Governor Prof. Amir Yaron indicated that inflation concerns drive policy, suggesting limited intervention in the foreign exchange market.
- 01The shekel appreciated 1.651% against the dollar, reaching NIS 2.859/$, and 1.571% against the euro at NIS 3.326/euro after the interest rate cut.
- 02Bank of Israel Governor Prof. Amir Yaron emphasized that the central bank will not aggressively intervene in the forex market, focusing instead on inflation management.
- 03The Israeli economy contracted by 3.3% in the first quarter, influenced by geopolitical tensions, yet the shekel's strengthening is seen as a deflationary factor.
- 04Institutional investors' hedging activities and portfolio rebalancing are contributing to the shekel's appreciation, counteracting the Bank of Israel's policy measures.
- 05Market analysts suggest that the interest rate cut could support further shekel appreciation, despite concerns from exporters about the strong currency.
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Despite the Bank of Israel's recent decision to cut interest rates, the shekel appreciated significantly, with a decrease of 1.651% against the US dollar, settling at NIS 2.859/$, and a 1.571% decrease against the euro, reaching NIS 3.326/euro. Bank of Israel Governor Prof. Amir Yaron stated that inflation concerns are guiding monetary policy, indicating that the central bank would not intervene aggressively in the foreign exchange market. The economy has faced a 3.3% contraction in GDP due to geopolitical tensions, yet the shekel's strength is viewed as a deflationary influence, lowering import costs. Analysts believe that the interest rate cut may further support the shekel's appreciation, although exporters are expressing concerns over the strong currency. The shekel's rise is also attributed to institutional investors' hedging activities and portfolio rebalancing, which create continuous demand for shekels, complicating the Bank of Israel's efforts to manage currency fluctuations.
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The appreciation of the shekel could negatively affect exporters by making Israeli goods more expensive abroad, while lowering import costs may help stabilize inflation.
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