The shekel continues to fall in value against the major currencies. On Friday, February 17, the official shekel-dollar exchange rate was 0.791% higher than the previous day, at NIS 3.566/$, and 0.158% higher against the euro, at NIS 3.794/€.

This is the weakest the shekel has been against the US dollar since early November, and it has lost 5% of its value in the last month. This is good news for exporters, but it has the opposite effect on Israeli consumers, as the depreciation of the national currency causes a spike in inflation, which affects the cost of living.

According to experts, there are several reasons for the Israeli currency’s depreciation against the US dollar. Firstly, the dollar’s strength, as the dollar index has reached a six-week high against a basket of the world’s major currencies. The recent Federal Reserve comments about its determination to control inflation have not only contributed to the dollar’s appreciation, but have also had a negative impact on Wall Street. As a result of these developments, Israeli institutional investors purchased dollars, causing the shekel’s value to fall.

Secondly, the uncertainty caused by the Israeli government’s planned judicial reform puts downward pressure on the shekel. The speculation among investors about withdrawing money from Israel has further contributed to the deterioration of market sentiment.

The Bank of Israel is expected to announce an interest rate hike on Monday, February 20, in order to combat inflation. Economists had previously predicted that officials would raise interest rates by 0.25%. However, the weakening of the shekel, which leads to higher import prices, as well as higher-than-expected inflation data published earlier this month (5.4%), have led exeprts to predict a 0.5% increase instead.