USD/ILS: ILS recovers on the dollar turn, domestic story mixed
USD/ILS: ILS Recovers on the Dollar Turn, Domestic Story Mixed
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It has really been the broad dollar story which has brought USD/ILS lower this month. The drop in short-term US rates is finally providing a reprieve to EM asset classes and stands to create the best environment for EM portfolio flows perhaps since late 2020. Israel has weightings in EM local currency bond and equity benchmarks – thus flows will help the ILS.
Domestically, the political situation remains tense. It has hard to conclude there has been any material improvement in the stand-off over judicial reforms – suggesting ILS could easily hand back gains. The Bank of Israel tightening cycle is probably over too.
But we think the softer dollar trend dominates over the next 6-12 months and USD/ILS heads back to the 3.40/50 area.