UBS forecast an appreciation of the Israeli shekel against the US dollar, anticipating a decline in the geopolitical risk premium.
The shekel briefly crossed the 3.80 level against the dollar due to recent tensions between Iran and Israel, as well as the ongoing conflict with Hamas. UBS analysts expect this pressure to ease, paving the way for the shekel to benefit from Israel’s economic recovery and the Bank of Israel’s (BoI) cautious policy.
The financial institution expects the start of the Federal Reserve’s easing cycle to further support the shekel’s performance. As geopolitical risks recede, UBS predicts the shekel will strengthen and has released quarter-end forecasts for the exchange rate.
The projections show a gradual appreciation of the shekel, with the rate expected to reach 3.60 by the end of next quarter, followed by 3.50 and 3.45, and stabilize at 3.45.
The UBS report highlights the resilience of the Israeli economy, which appears poised to recover from the effects of the geopolitical events that have recently affected currency fluctuations. The shekel’s forecast gains reflect confidence in the country’s economic management and the expected shift in US monetary policy.
The outlook for the shekel is based on the assumption that the risk premium, which has been increased due to the recent confrontations, will decline over time. This reduction in risk is expected to be a key driver of the shekel’s strength in the coming quarters.
In conclusion, UBS’s analysis points to a brighter future for the Israeli shekel, supported by a robust economic recovery and favorable monetary conditions.
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