Israel’s Shekel at 4 Welcome to Flug With Rates Near ZeroGabrielle Coppola and Sharon Wrobel
Israel’s currency fell to 4 shekels per dollar for the first time in more than two years on speculation the central bank will step up efforts to weaken the exchange rate to support growth after cutting interest rates close to zero.
The shekel fell 1.4 percent to 4.0090 per dollar in New York, one of the biggest declines among 31 major currencies tracked by Bloomberg. It has weakened 2.8 percent this year, extending its decline since 2013 to 13 percent.
The currency slid after European policy makers’ unprecedented quantitative-easing program fueled speculation countries with near-zero interest rates will also adopt unconventional measures to bolster growth. The Bank of Israel is expected to hold its benchmark rate at 0.25 percent for a fifth straight month next week. The bank has purchased foreign currency to weaken the shekel and help exports after gross domestic product contracted in the third quarter for the first time in five years.
“They’ve talked about unconventional measures, but at this point they’re letting the weak shekel do all the heavy lifting,” Win Thin, global head of emerging-market strategy at Brown Brothers Harriman & Co., said by phone from New York. “They can’t cut rates anymore but they can encourage or accept more weakness.”