The shekel on Monday weakened by 0.5% against the dollar, now trading at roughly 3.60 shekels, and the euro, trading around 3.93 shekels.
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Meanwhile, analysts doubt the Bank of Israel will cut its benchmark interest rate in the upcoming April 8 decision, following similar trends in the United States and Europe.
The ongoing war against Hamas in Gaza and consequent growth in defense expenditures, combined with the Finance Ministry's reluctance to reduce the deficit, will make it harder for the central bank to lower interest rates again this year, following a 25 bps cut to an annual rate of 4.5% on January 1.
On Wednesday, the Knesset is set to approve the 2024 budget, with the Bank of Israel watching its performance to determine the feasibility of further interest rate cuts later in the year.
Economic analysts predict the base interest rate may fall to 3.75%-4.0% by year's end. "Market expectations for immediate interest rate cuts have sharply declined, causing stock market volatility in the U.S. and Europe," said Joseph Freiman, CEO of Prico and Freiman Holdings Group.
"Efforts to minimize currency exposure and cautious approaches by countries are stabilizing the shekel's exchange rate between 3.55-3.65 per dollar. Yet, potential for shekel depreciation exists amid budget deficit increases, credit rating downgrades, and security concerns, possibly exceeding 3.6 shekels."