UBS projected an appreciation of the Israeli shekel against the US dollar, anticipating a decrease in the geopolitical risk premium.
The shekel had briefly surpassed 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 these pressures to ease, setting the stage for the shekel to capitalize on Israel's economic rebound and the prudent policies of the Bank of Israel (BoI).
The financial institution anticipates that the commencement of the Federal Reserve's easing cycle will further support the shekel's performance. As the geopolitical risks subside, UBS predicts the shekel will strengthen and has set forth its end-of-quarter forecasts for the USDILS exchange rate.
The projections show a gradual appreciation of the shekel, with the rate expected to reach 3.60 by the end of the next quarter, followed by 3.50, 3.45, and stabilizing at 3.45 through the first quarter of 2025.
The UBS report highlights the resilience of Israel's economy, which seems poised to recover from the impacts of the geopolitical events that have recently influenced currency fluctuations. The shekel's forecasted gains reflect confidence in the country's economic management and the anticipated shift in US monetary policy.
The outlook for the shekel is based on the assumption that the risk premium, which has been elevated due to the recent confrontations, will diminish over time. This reduction in risk is expected to be a key driver for the shekel's strength in the coming quarters.
In conclusion, UBS's analysis points to a brighter future for the Israeli shekel, backed by a robust economic recovery and favorable monetary conditions.
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