The shekel is strengthening against the dollar and euro in inter-bank trading today. In the early afternoon, the shekel-dollar exchange rate was up 0.61% to NIS 3.418/$ and the shekel-euro exchange rate was up 0.25% to NIS 4.864/€.
Yesterday, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.439/$, down 0.38% on the previous day, and set the shekel-euro representative exchange at NIS 4.876/€, up 0.52%.
"The dollar will probably continue to weaken in international markets over the coming months, and we do not expect to see a turnaround in US monetary policy until next year, and the shekel will continue to receive a tail wind in the world, in part because of Israel's robust economy," says USG Capital.
USG analysts Eli Ben-David and Shay Zakhaim say that markets are responding to current developments in the US and worries that the debt ceiling will not be raised by August 2, resulting in a default, market turmoil, and another financial crisis.
In Israel, the analysts predict that inflation will reach 4.5%, and they also predict more intermittent interest rate hikes to 4% by the end of the year. On the macro side, they note the continued increase in industrial output, reported by the Central Bureau of Statistics yesterday. Industrial output was 5.9% higher in March-May 2011 than in the corresponding months of 2010, and industrial output growth, excluding high tech, was 8.4%.
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