The shekel has experienced its sharpest decline in months, plunging 4.5% against the U.S. dollar in just one week. The dollar's value surged to 3.16 shekels in continuous trading on Tuesday afternoon, up from its official rate of 3.02 shekels on Election Day. This rapid depreciation reflects growing concerns over Israel's political instability following the recent elections and the uncertainty surrounding the formation of a new government.
The euro has also seen a significant rise, trading at approximately 3.54 shekels on Tuesday, up from 3.5168 shekels on Monday. The demand for foreign currency is widespread, driven by institutional investors, private investors converting shekels, and households. The sharp increase in the dollar and euro is expected to raise the cost of imported goods, potentially accelerating inflation.
Forecasts already suggest a 0.5% increase in Israel's October Consumer Price Index, with November's inflation reading likely to be higher than previously anticipated due to the shekel's depreciation. Meanwhile, the Tel Aviv Stock Exchange has continued its downward trend, with the TA-90 index falling 1% and the TA-125 declining 0.6%.