UBS forecast the Israeli shekel to appreciate against the US dollar, expecting a decline in the geopolitical risk premium.
The shekel briefly topped 3.80 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, setting the stage for the shekel to benefit from Israel’s economic recovery and sound policies from the Bank of Israel (BoI).
The financial institution expects the start of the Federal Reserve’s easing cycle to further support the shekel’s performance. As geopolitical risks subside, UBS forecast a stronger shekel and provided an end-of-quarter exchange rate forecast.
Forecasts show a gradual appreciation of the shekel: the rate is expected to reach 3.60 by the end of the next quarter, followed by 3.50, 3.45 and stabilize at 3.45 during the first quarter of 2025.
The UBS report highlights the resilience of Israel’s economy, which appears poised to recover from geopolitical events that have recently affected currency fluctuations. The shekel’s projected growth reflects confidence in the country’s economic management and an expected shift in US monetary policy.
The shekel’s outlook is based on the assumption that the risk premium, which has been raised by recent clashes, will fall over time. This de-risking is expected to be a key factor in the strengthening of the shekel in the coming quarters.
In conclusion, the UBS analysis points to a brighter future for the Israeli shekel, underpinned by a robust economic recovery and favorable monetary conditions.
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