Shekel Sinks to an 8-Year Low as Israel-Hamas War Continues

Vignesh Karunanidhi
Shekel Sinks to an 8-Year Low as Israel-Hamas War Continues
Source: Reuters

The Israeli shekel weakened past 4 shekels per U.S. dollar on Monday for the first time since 2015. As the Israel-Hamas war continues, the Shekel continues to weaken in value.

The shekel has declined approximately 4% against the dollar since Hamas initiated a surprise attack on Israel on October 7. On Monday, the shekel was trading at 3.9981 per dollar.

Even though the Bank of Israel has never specified an exchange rate level for intervention, 4 shekels per dollar is seen as an important threshold by market participants.

Bank of Israel announced selling $30 billion to stabilize Shekel

Part of the shekel’s weakness is attributed to investors pricing in expected interest rate cuts by the central bank beginning October 23. Last week, the Bank of Israel announced it would sell $30 billion in foreign currency to maintain financial stability.

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In addition, the bank said it would provide up to $15 billion in dollar liquidity to markets through swap mechanisms. According to the bank’s statement, “The Bank of Israel will continue monitoring developments, tracking all the markets, and acting with the tools available to it as necessary.”

The last time the central bank intervened was in 2021. Then, it bought billions of dollars to stem the Israeli currency’s rise. Now, it plans to sell dollars openly to maintain stability and functioning. However, Ehsan Khoman of MUFG believes the shekel is unlikely to decline much further despite the Israel-Hamas war, given the central bank’s support.