Shekel lowers amid conflict and fear
The outbreak of war in Israel over the weekend sent a shock into the nation’s currency, the shekel. Upon market open Sunday night, USD, GBP and EUR gapped up over 1,000 pips against ILS resulting in multi-year extremes. USD/ILS closed Sunday above 3.9600 to mark the highest price since February 2016.
Monday, the Bank of Israel stepped in to prevent a further slide in the shekel. The nation’s central bank said it would sell up to $30 billion of foreign reserves in the open market to stabilize ILS and ensure liquidity in the short term. While volatility remains high, prices have stabilized below Sunday highs in GBP/ILS, EUR/ILS and USD/ILS so far.
How will war in Israel affect the US?
Contingent on the US’ involvement, the economic effects of war felt by the US could be minimal. Exports constitute 10.9% of US GDP and of that, only 3.5% are exports to the Middle East. Impact could vary greatly if the US decides to allocate resources to the war or if additional nations get involved.
European countries will likely see a greater impact due to geographic proximity and the EU’s history of financial aid to Palestine. As events unfold, GBP/ILS and EUR/ILS could see greater volatility as a result. Both pairs closed higher Monday while USD/ILS did not.
