The Israeli shekel has shown significant strength since early October, appreciating to 3.26 per USD, marking its highest value since August 2022. This appreciation follows the initial phase of an agreement between Israel and Hamas aimed at resolving the two-year conflict in Gaza. On October 9, a significant step was taken as Israel and Hamas reached an accord on the release of hostages, which will also see an increase in humanitarian aid deliveries to Gaza. These ongoing discussions, facilitated by intermediaries from the United States, Egypt, Qatar, and Turkey, are guided by a framework proposed by US President Donald Trump. Talks remain ongoing in Sharm El-Sheikh, concentrating on the reconstruction of Gaza and its prospective governance structures.
The shekel’s recent strength provides the Bank of Israel with greater scope to adjust its monetary policy. Last month, the central bank maintained its benchmark interest rate at 4.5% for the 14th straight session, citing ongoing geopolitical uncertainties as a primary concern. Concurrently, inflation has softened to 2.9%, successfully re-entering the government’s target range of 1% to 3% for the first time since June 2024.
