Currency Stability in Palestine—Why Has the Gap between Official and Market Exchange Rates Narrowed?
Dear Sir/Madam,
I am pleased to share for your consideration my latest analytical article entitled:
“Currency Stability in Palestine: Why Has the Gap Between Official and Market Exchange Rates Narrowed?”
The article examines the recent narrowing of the difference between the official exchange rates of the U.S. dollar, Jordanian dinar, and euro and the rates offered by Palestinian banks and licensed money changers.
Although this convergence may initially appear to result simply from lower profit margins among currency dealers, the article explains that the situation is more complex. It reflects the interaction of several factors, including relative exchange-rate stability, lower short-term risks for money changers, changes in supply and demand, the local availability of foreign currency, competition among financial institutions, the accumulation of surplus shekels, and the continuity of correspondent banking relationships.
The article explains that during periods of strong exchange-rate volatility, banks and money changers tend to widen the spread between buying and selling prices to protect themselves against sudden losses. When currency movements become more stable, the risk premium declines, allowing market rates to move closer to the official reference rate.
It also discusses the specific characteristics of the Palestinian currency market, including:
• The close movement of the Jordanian dinar and the U.S. dollar because of the dinar’s fixed exchange-rate arrangement.
• The additional international factors affecting the euro.
• Seasonal demand for foreign currency related to travel, pilgrimage, education, healthcare, trade, and property transactions.
• The impact of surplus shekel liquidity within Palestinian banks.
• The importance of correspondent banking relationships for transfers, trade finance, and payment settlements.
• The unequal impact of foreign-currency movements on savers, consumers, importers, and households with obligations denominated in foreign currencies.
The article emphasizes that the narrowing of the exchange-rate gap is a positive sign of greater market clarity and relative order, but it should not be interpreted as evidence of permanent stability or broader economic recovery.
The analysis is supported by findings from a recent survey conducted by the Palestinian Center for Public Opinion, which found that more than nine out of ten respondents believe that Palestinian purchasing power has declined. This widespread financial vulnerability makes households particularly sensitive to even limited movements in exchange rates, savings values, prices, and living costs.
The article concludes that current market calm remains fragile. It may be affected by political and security developments, interest-rate decisions, capital movements, foreign-currency demand, surplus shekel liquidity, banking restrictions, and changes in correspondent banking arrangements.
The article was prepared by Dr. Nabil Kukali, Founder and President of the Palestinian Center for Public Opinion (PCPO), who has more than three decades of experience in survey design, public-opinion research, and the analysis of economic, political, and social trends in Palestine and the region.
I hope the article will contribute to a better understanding of the Palestinian currency market and the economic pressures affecting households, financial institutions, and the wider economy.
English Version (PDF)
Arabic Version (PDF)
Sincerely,
Dr. Nabil Kukali
Founder and President
Palestinian Center for Public Opinion – PCPO
