Israel Shekel Weakens to 7-Week Low Before Interest Rate Meeting

Israel’s shekel headed for the weakest level in almost seven weeks, reducing pressure on the central bank to cut interest rates today to spur growth and support the currency.

The shekel depreciated 0.3 percent to 3.6015 a dollar, the lowest on a closing basis since July 10, at 2:30 p.m. in Tel Aviv. One-year interest-rate swaps, an indicator of investor expectations for rates over the period, fell five basis points to 1.26 percent.

The Bank of Israel will leave interest rates at 1.25 percent, according to all 22 analysts surveyed by Bloomberg. In May, the regulator sought to temper shekel gains, which hurt exporters, by cutting rates twice from 1.75 percent and announcing a program to buy foreign currency. Policy makers held the benchmark rate at 1.25 percent at its last meeting on July 29. The central bank will announce the rate decision for September and October at 5:30 p.m. in Jerusalem.

“The weakening of the currency and recent sound economic growth data supports the consensus that the central bank won’t need to lower interest rates today,” said Rony Gitlin, head of spot trading at Bank Leumi in Tel Aviv.

Israel relies on exports, including to the U.S., for 40 percent of gross domestic product. The nation’s economy expanded an annualized 5.1 percent in the three months through June from a revised 2.7 percent in the first quarter, the statistics bureau said Aug. 18.

The shekel has declined 1.1 percent so far this month, trimming this year’s advance to 3.6 percent, the best performer among 31 major currencies tracked by Bloomberg.

Growth is forecast to expand in 2014 to 3.5 percent from 3.2 percent this year, according to the median estimate of six economists in a Bloomberg survey. The yield on the benchmark 4.25 percent notes due March 2023 was unchanged at 3.98 percent.

To contact the reporter on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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