Shekel appreciates 4.8% against dollar in 2023 so far

• Author: Hezi Sternlicht
• Published date: 26 January 2023
• Publication title: Globes (Rishon LeZion, Israel)

The experts attribute this mainly to the weakness of the dollar on world markets and to global macroeconomic conditions. Another factor is connected to the stock market with the Nasdaq up 9% since the start of the year and any wind in the sails of tech investors is an encouragement for the shekel

The pressure from a US recession

Bank Hapoalim chief financial markets strategist Modi Shafrir says, "We see the strengthening of the shekel against the dollar stemming mainly from the recovery of the Nasdaq index. When the index rises, institutional bodies in Israel sell dollars because they need to reduce their dollar exposure. The situation is of course reversed when the Nasdaq index falls. Generally, the dollar on world markets has been weakening in recent weeks. This can be seen in the shekel-euro exchange rate, which has not changed sharply in contrast to what is happening against the dollar."

He adds, "Generally, the shekel has strengthened 3% against the basket of major currencies since the start of 2023, after the shekel weakened 3.3% against the basket in December. So we are also talking about a correction of the shekel with other currencies, after showing weakness in December.

"On world markets, the dollar has weakened significantly and has fallen from its peak. This stems from the closing of positions opened by speculators. There are also estimates that the US will enter a recession and in line with this, priced in are interest rate cuts from the second half of the year.

"Since China's economy is opening up these days, there is more optimism about the economy in Europe and about emerging markets in general. Now, we tend to estimate that the economically weakest point in the world will be mainly in the US. So after the dollar strengthened a lot in the world last year, it has weakened a lot now."

He also adds, "In Israel from a macroeconomic point of view, it can be noted that investments in high-tech are moderating, but there are also data that support the strong shekel. Basic factors support a strong shekel in the long term, this is on the assumption that nothing extreme will happen."

Unique strengthening of the shekel

Bank Leumi head of markets strategy Kobby Levi thinks that the strengthening of the shekel has only just begun. He says, "First of all as a result of the devaluation of the dollar. We also see that the US currency strengthens in the world 'when everything is bad' or 'when everything is good' in the US economy. Today we can say that the...