According to a report, the shekel rose 2.5% against the dollar in the last week of October, making it the best-performing emerging market currency and bucking the trend of weaker emerging market currencies against the dollar ahead of the US presidential election. . A review of the foreign exchange market by US investment bank Goldman Sachs.
Goldman Sachs expects the shekel to appreciate to NIS 3.6 to the dollar over the next six months and continue to appreciate for the foreseeable future. Goldman Sachs expects interest rates to be NIS 3.5/$ in one year and NIS 3.4/$ in 2027.
Goldman Sachs said last week’s rise in the shekel was due to “lower geopolitical risks since the weekend, as Israel’s targeted attacks avoided Iranian energy facilities, and a significant drop in oil prices.” “We were also connected.” The investment bank’s research said: “Looking ahead, geopolitical risks will continue to be the main driver for the shekel. Some of the gains have already been dissipated as the week progresses, with risks rising again over the weekend. However , in addition to this, macroeconomic fundamentals are also taken into account,” he added. And monetary policy continues to support the currency. ”
The shekel fell 0.7% against the dollar on Friday as the risk of a renewed escalation of the conflict between Israel and Iran escalated over the weekend. Security risks have led to high volatility in the shekel since early 2023, and caused even greater fluctuations after the outbreak of war 13 months ago. Exchange rate stability became one of the Bank of Israel’s main goals, and at the beginning of the war it intervened in the foreign exchange market for that purpose. Although the central bank’s sale of $8.5 billion in foreign exchange reserves helped prevent the value of the shekel from depreciating, the instability caused by the security situation persisted.
Goldman Sachs said the Bank of Israel is expected to maintain a restrained monetary policy. “On the monetary policy front, although expected downside inflation data in September has reduced the likelihood of rate hikes, the Bank of Israel still faces inflation risks from geopolitical uncertainty and a still-wide budget deficit. “The United States is likely to maintain a cautious stance in support of the war effort.”
Published by Globes, Israel Business News – en.globes.co.il – on November 4, 2024.
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