The potential deal to release the hostages and initiate a cease-fire is causing the shekel to strengthen significantly, while the dollar and euro are taking a hit. The dollar, whose representative rate was set on Monday afternoon by the Bank of Israel at 3.6720 shekels, is currently trading around 3.63 shekels. The euro, whose representative rate was set yesterday at 3.743 shekels, is currently trading around 3.72 shekels.
Banks and investment firms estimate that a complete cease-fire on the northern and southern borders, which may also lead to an end to the Houthi projectiles, will subsequently lead to a decline in the dollar rate to around 3.50 shekels, after it had already crossed the four-shekel mark at the beginning of the war.
A sharp decline in the exchange rates of the main foreign currencies will lead to a significant reduction in the import of raw materials and products into Israel, and it may slightly offset the high consumer price index due to the wave of price increases expected for January (to be published on February 15).
"The expectation of an arrangement for the release of the hostages, the cease-fire, which also includes a cease-fire in the southern arena, contributes to foreign exchange supplies and the appreciation of the shekel by about 1.5% from the levels traded on Monday," said CEO of the Prico and Freiman Holdings Group, Yossi Freiman.
"The stabilization in the U.S. stock market contributed to reducing foreign exchange demand from institutional bodies, so the activity of foreign bodies and Israeli exporters selling foreign exchange was more significant and led to excess supply that led to the appreciation of the shekel. The euro-shekel exchange rate also fell, but the weakening of the euro against the shekel was at a lower rate than that recorded against the dollar, due to the slight strengthening of the euro against the dollar," he added.
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Ran Sinai, chief economist at Ultra Finance, told Ynet that "the shekel has been strengthening against the dollar in recent days amid rumors of reaching understandings regarding the cease-fire with Hamas and the release of dozens of hostages. Once the leaks from the negotiations showed that this was an even more significant deal than initially thought, the dollar strengthened and stabilized."
"The meaning of a deal is the entry of dollars in large volumes as part of aid money for Gaza on the one hand and rearmament in Israel on the other, and it seems that traders are preparing for this in advance. While the American best man of the deal will have to back up his words with economic support, in Europe the shekel is strengthening due to the the uncertainty within the continent," he said.