Shekel slides to lowest rate in three years against US dollar

Exchange rate hits NIS 3.77 before settling at NIS 3.763, up more than 1% over the day before; euro also makes gains

Dollars and shekels. (Olivier Fitoussi/Flash90)
Dollars and shekels. (Olivier Fitoussi/Flash90)

The shekel continued to slide against the US dollar on Tuesday, trading at NIS 3.763, its lowest rate since March 2020.

At one point, the shekel reached NIS 3.77 per dollar, before recovering slightly. The closing exchange rate was still a one percent rise over Monday’s rate.

The Israeli currency also slid against the euro, which traded at NIS 4.1144, a rise of 0.915% over the day before.

Monday saw the shekel fall against the dollar but then slow its descent after Fitch Ratings affirmed Israel’s A+ credit rating with a stable outlook, as it did in March, but continued to warn of fallout if the government advances additional parts of its overhaul of the judiciary.

Analysts linked the recent fall in the shekel’s value to political turmoil over the judicial overhaul, an overall strengthening of the dollar against a number of foreign currencies, and that August is peak vacation season that sees many Israelis purchasing foreign currencies as they make trips abroad.

The shekel’s woes came as the Central Bureau of Statistics released figures showing the consumer price index rose by 0.3% in July, with the annual inflation rate dropping significantly from 4.2% in July to just 3.3%.

Prices of fruits and vegetables rose by 3.4% and transportation prices rose by 0.7%, while clothing and shoe prices dropped by 4.8% and furniture prices dropped by 1.2%, data showed.

Housing prices dropped by 0.2% relative to April and May, with the price of new apartments down by 0.6%.

Vegetables and fruits on sale at the Mahane Yehuda market in Jerusalem, February 22, 2018. (Dario Sanchez/Flash90)

The Bank of Israel has sharply raised the interest rate — from 0.1% to 4.75% — over the past 16 months to battle mounting inflation.

Economists on Tuesday saw increased chances that the Bank of Israel will again raise interest rates in September due to the weakened shekel against foreign currencies, Ynet reported.

Fitch’s rating came some three weeks after rival credit rating agency Moody’s Investors Service warned about “negative consequences” and “significant risk” for Israel’s economy and security situation following the passage of the first bill of the government’s contested judicial overhaul.

In April, Moody’s lowered Israel’s credit outlook from “positive” to “stable,” citing a “deterioration of Israel’s governance” and upheaval over the government’s bid to dramatically overhaul the judiciary.

Other credit rating agencies, including S&P, have been warning in recent months about a deterioration in Israel’s governance and the potential weakening of the judiciary and institutional strength, and raised concerns over heightened domestic social and political tensions.

The main concern in the business and tech community is that the proposed judicial overhaul will erode democracy and weaken checks and balances, which will make venture capitalists and other money-makers leery of investing their money in the country, triggering an outflow of funds.

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