Shekel shakes off recent weakness against dollar

The shekel strengthened again against the dollar, with the Bank of Israel setting the representative rate down 0.135% to NIS 2.95/$. Over the past month, the shekel has gained about 2.5% against the dollar, becoming the world's strongest currency, according to Meitav. Inflation in Israel fell to 1.5%, below the central bank's target, but IBI's chief economist Rafi Gozlan expects it to rise to 2.2% in the coming year. The current interest rate stands at 3.5%, with the next decision expected in early September.

The shekel strengthened again against the US dollar, with the Bank of Israel setting the representative rate down 0.135% to NIS 2.95/$, while the shekel rose 0.196% against the euro to NIS 3.419/€. Over the past month, the shekel has strengthened by about 2.5% against the dollar, making it the world's strongest currency, according to Meitav. The euro and sterling gained only 1.5% and 1.8% respectively in the same period. The dollar weakened to its lowest level in about two months, with the DXY index falling for a third consecutive day. This follows reduced expectations for Fed rate hikes after weaker US economic data. In Israel, inflation fell to 1.5% annually, below the central bank's target range, but IBI's chief economist Rafi Gozlan expects it to rise to 2.2% in the coming year due to temporary factors fading and a tight job market. The real interest rate is relatively high at 1.75%-2%, making shekel assets attractive. The Bank of Israel's next interest rate decision is in early September, with the rate currently at 3.5%.