Investors are betting on the weakening of the Israeli currency. Since the outbreak of the war with Hamas, the shekel has been weakening, and investors clearly fear that the conflict will be long-lasting and may expand.
Traders are betting that the shekel will continue to weaken amid fears that the conflict between Israel and Hamas may intensify. Short positions last week reached their highest level since January 2022, according to Deutsche Bank Research data shared with Insider, and Wall Street fears the Middle East could be drawn into war.
The shekel is weakening
The shekel fell by about 5%. to just over 4 shekels per dollar after the October 7 Hamas attack, hitting an eight-year low against the dollar on Tuesday. The decline came despite the Bank of Israel pledging to sell more than $30 billion in reserves to shore up the currency.
The central bank may now have to choose between keeping interest rates low to support Israel’s wartime economy or raising borrowing costs. When rates rise, currencies tend to strengthen as they become more attractive to foreign investors seeking juicier returns.
The Israeli stock exchange is losing
The shekel is not the only Israel-linked asset that has plummeted since the Hamas attack. The day after the attack, the benchmark TA-35 stock index fell 6.5% and has fallen even more since then.
Geopolitical uncertainty has caused investors to turn to assets considered safer and more stable, such as gold, treasury bonds and the dollar. Gold, which tends to increase during periods of volatility due to its stable price, has increased by over 6% since October 7. to almost $2,000 an ounce.