Concerns over political instability following Israel's elections and the potential economic damage from delays in forming a new government have sent the shekel tumbling at its fastest pace in months.
The U.S. dollar traded at around 3.16 shekels in continuous trading Tuesday afternoon, compared with its official representative rate of 3.02 shekels on Election Day, representing a depreciation of approximately 4.5% in just one week. On Monday, the dollar's representative rate was set at 3.1360 shekels, up 0.6% from Friday.
The shekel fell at its fastest pace in months
(Photo: Shutterstock)
The euro also has surged, trading at approximately 3.54 shekels on Tuesday. Its representative rate was set at 3.5168 shekels on Monday, following a 0.7% increase.
Demand for dollars is coming from across the market, including institutional investors, private investors converting shekels into foreign currency and households. The sharp rise in both the dollar and euro is increasing the cost of imported raw materials and consumer goods, potentially accelerating inflation.
Forecasts already point to a 0.5% increase in Israel's October Consumer Price Index. November's inflation reading, previously expected to be relatively low before the shekel's depreciation, could now also come in higher.
Meanwhile, the Tel Aviv Stock Exchange continues to register losses, with the TA-90 index falling 1% and the TA-125 declining 0.6%.