• Boi not ready to ease policy further, usd-ils likely at 3.70 by end-2016

    Source: FxWire Pro - Commentary / 22 Apr 2016 10:52:30   America/New_York

    BoI as widely expected held policy unchanged at Thursday's MPC meeting. The central bank kept its policy rate unchanged at 0.10%, confirming market expectations that it is not ready to ease policy further.

    Such expectations have driven the shekel firmer in recent weeks. Intensifying deflation in the Israeli economy in recent months however keeps bets of negative interest rates still alive in the market.

    BoI is rather unsuccessful in curbing the shekel appreciation. Its FX interventions provide temporary relief without changing the trend. Nevertheless, BoI appears to be uncomfortable pursuing the opposite policy direction of Fed policy.

    "Our base-case for now is that it will not cut rates further, but will stomach the shekel appreciation which will result. We see USD-ILS reaching 3.70 by year-end." said Commerzbank in a report.

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