As tensions between Israel and the Hamas group rise, the Israeli shekel (ILS) finds itself in a precarious position.
In recent days we have witnessed a rapid and disturbing drop in the value of the shekel against the US dollar (USD), taking it to the lowest point in more than seven years on Monday, October 9. This alarming development underlines the profound impact of the ongoing conflict. in Israel’s currency markets.
At press time, the USD/ILS currency pair stands at 3.92, the highest level of the dollar against the shekel since March 2016.
Why is ILS down?
The rapid decline of the shekel against the dollar comes as the conflict in the Middle East continues to escalate.
Notably, the war between the Hamas militant group and Israeli troops entered its third day on October 9, with casualties on both sides increasing by the hour.
Rising risk sentiment and growing political uncertainty had an adverse impact on the Israeli shekel, while safe-haven currencies such as the dollar and the Japanese yen (JPY) attracted investors.
The Bank of Israel will sell $30 billion in foreign currency to shore up the ILS
To shore up its battered currency, the Bank of Israel announced on October 9 that it will sell $30 billion in foreign currency on the open market. The move marks the first foreign currency sale for Israel’s central bank.
“The bank will operate in the market over the coming period to moderate volatility in the shekel exchange rate and provide the liquidity necessary for the proper and continued functioning of the markets.”
– the bank said in a statement.
The selling appeared to quickly limit some of the shekel’s losses. Before recovering to 3.92 per dollar, the ILS was at a nearly eight-year low of 3.98 per dollar.
Meanwhile, the US dollar index rose 0.35% to 106.4 in the last 24 hours, while the yen, which investors also consider a safe-haven currency, rose 0.1% to 149.1 .
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