Shekel Weakens as US Dollar Gains on Global Markets and Tensions Rise
The Israeli shekel weakened slightly as the US dollar gained amid rising geopolitical tensions and anticipated US economic data releases.
Shekel Weakens Slightly as Dollar Gains on Global Markets
The Israeli shekel experienced a slight pullback at the opening of the trading week, as the US dollar ticked upward globally and strengthened moderately in the local market, rising by 0.3% to trade above 3.05 shekels. Meanwhile, the euro edged up by 0.2% to trade just below 3.48 shekels.
On global markets, the US dollar index gained 0.2% to 101.1 points. The euro remained relatively stable, trading just under $3.14, while the British pound weakened by 0.1% to trade above 1.32 shekels. In Japan, the dollar rose by 0.3% to trade at 157.8 yen.
Geopolitical Tensions and Oil Prices Drive FX Movement
Driving the foreign exchange trading is US President Donald Trump’s decision to reject an updated settlement proposal from Iran aimed at ending the conflict and reopening the Strait of Hormuz. According to a Wall Street Journal report over the weekend, Trump told his advisers that he expects US strikes in the country to resume following the midterm elections in November. Oil prices rose by more than 1% in response to the reports.
"The dollar may strengthen in the short term beyond levels justified by economic data if tensions in energy markets persist and inflation risks continue to mount," said Sim Moh Siong, FX strategist at OCBC Bank.
According to Siong, the bank's baseline scenario remains a moderate strengthening of the dollar through the end of the year. OCBC is a Singaporean bank—full name Oversea-Chinese Banking Corporation—and one of the largest financial institutions in Southeast Asia, providing banking, wealth management, and insurance services.
Focus Shifts to US Economic Data
Later in the week, investor attention is expected to shift toward upcoming US economic data. The second-quarter Personal Consumption Expenditures (PCE) price index is scheduled for release on Wednesday, followed by the September employment report on Friday. According to forecasts, both releases are expected to support continued monetary policy tightening.
As of today, the markets are pricing in a 65% probability of an interest rate hike by the Federal Reserve at its next meeting, scheduled for exactly one month from now on October 28.
