Israeli shekel falls to lowest level in 39 years amid Gaza siege

(File photo: Jordan News)
TEL AVIV — The Israeli Shekel's exchange rate has experienced prolonged losses in recent trading sessions, marking its lengthiest losing streak against the US Dollar in 39 years. The exchange rate reached approximately 4.07 Shekels to the Dollar, representing the Israeli currency's lowest point since December 2014.اضافة اعلان

Despite this, the Israeli currency and bonds have continued to decline even after the Bank of Israel's decision to maintain the interest rate at 4.75 percent during a recent meeting, raising concerns among investors about the potential escalation of the conflict and its far-reaching economic impact, Khaberni reported.

As losses accumulate due to the ongoing war in Gaza, the Bank of Israel revised its economic growth forecast down to 2.3 percent for 2023, down from the previous projection of 3 percent, with an expected GDP growth of 2.8 percent in 2024. The revised forecast takes into account various economic implications that might impact both real activity and financial markets.

It might persist for a while as there is no apparent resolution in sight
Additionally, an analysis by Bloomberg suggests that the depreciation of the Israeli Shekel might persist for an extended period, as there is no apparent resolution in sight for the ongoing Israeli military actions in Gaza.

A few days ago, Moody's, the investment services agency, issued a warning about the potential downgrade of Israel's credit rating due to the severity of the military escalation with the Hamas movement and Palestinian factions in Gaza. A credit rating downgrade could result in increased borrowing costs for Israel as the country prepares for what might become a prolonged conflict.

Compounding the risks are the weak growth rates in the Middle East and North Africa countries, which are expected to decrease to 2 percent this year compared to over 5 percent last year, according to a report from the International Monetary Fund on the sidelines of the annual meetings of the IMF and the World Bank held in Marrakech during the first half of October.

Without the Bank of Israel's intervention with a package valued at $45 billion, volatility in exchange rates would have been much more significant.

In a recent report, the Israeli newspaper Yedioth Ahronoth stated, "The technology industry in Israel is facing a crisis that will negatively impact the country's economy, with many Israelis working in this field enlisting for military service."

A few days ago, the Fitch credit rating agency placed Israel's long-term debt under negative credit watch, indicating its readiness to downgrade the credit rating. This was due to the risk of other anti-Israeli entities, such as Iran and Hezbollah, joining the wide-scale conflict.

The Israeli Ministry of Economy has been unable to estimate the economic sectors that have lost the most significant number of reservists. However, most of those joining the battle are under the age of 40.

These younger residents play a crucial role in the Israeli technology sector, which accounts for approximately 20 percent of the annual GDP.

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