Shoshanna Solomon is the Times of Israel reporter on startups and business
A third reason, he explained, is that foreign stock markets are booming.
“There is a strong correlation between the functionality of foreign equity market locations and exchange rates,” he said. “When inventory market locations pass, shekel is strengthened. When inventory market locations fall, as in March and April this year, the shekel reached 3. 90 per dollar. In recent months, until the last few days, the US stock market has been in the middle of the world. But it’s not the first time It has damaged records and grown more than Israel’s stock market, and that creates tension for appreciation.
Indeed, when stock markets rise, Israeli institutional investors stack their budget in those markets, buying stocks. When the price of these assets increases, as generation inventories did in U. S. markets until recently, it adjusts the balance of its portfolios, expanding its exposure to foreign currencies, such as the dollar. To compensate for this exposure, these institutional investors sell some of their foreign exchange reserves.
“Investors hold their shares, but sell dollars to offset this exposure,” he said. “They need your general exposure to foreign currency. ” The hedge is not only against the dollar, of course, however the maximum investments are denominated in dollars.
The recent drop in the US stock market is in the middle of the U. S. stock market. But it’s not the first time It has contributed to a slight weakening of the shekel in recent days. On 9 September, the shekel’s representative rate was set at 3,4070 against the dollar.
Kobby Levi, head of market strategy at Leumi Le-Israel Bank’s Capital Markets Division, said the recent high on the shekel opposed to the dollar is not so much due to the shekel’s strength but to the dollar’s weakness in the world.
In fact, unlike the euro, shekel has weakened in recent months, he said. Shekel is listed at about four NIS shekels per euro, with NIS 3. 7 per euro before the virus begins in mid-February.
The dollar’s weakness is due to the fact that interest rates in the United States have fallen to about zero, making investors less eager to buy the currency, and also because the United States is mired in political uncertainty about the final election results. and in a fitness emergency caused by the pandemic. Interest rates are expected to remain low for years as long as the US economy is in the middle of a year. America deals with the coronavirus coup, Federal Reserve Chairman Jerome Powell said this month.
“In the world, there are more considerations than ever before about fiscal and financial expansion in the United States – how long it can continue and what happens if there is a political replacement in the United States – all of this weighs on the dollar,” he added. Levi says of Leumi.
“The reverse is that the strengthening of the dollar-opposing shekel is due to the strength of the shekel or the Israeli economy, but to the weakness of the dollar in the world,” he said.
This would possibly be the case, however, the shekel has risen to record levels over the more than 10 years, rated among the most powerful currencies in the world.
From 31 December 2018 to 9 September 2020, the Israeli shekel appreciated up to 9. 5%, the maximum against the dollar, compared to six other primary currencies: the euro, sterling, the Australian dollar, the Japanese yen, the Swiss. Chinese renminbi, according to knowledge through Hapoalim Bank. The Swiss franc appreciated by 6. 5%, yen 3. 2%, euro 2. 5% and renminbi at 0. 2%. Sterling weakened against the dollar through 1. 5% during the period, and the Australian dollar weakened by 2. 7%.
Even the large acquisition of dollars through the Bank of Israel, intermittently since March 2008 to involve shekel, has failed to stem its rise. The Bank of Israel’s currency purchases in August totaled $2. 6 billion, the central bank announced Monday, raising its value. total foreign exchange reserves to nearly $162 billion. Reservations are held in many currencies and changed to dollars at the currency exchange rate.
“The Bank of Israel’s intervention in the foreign exchange market would possibly slow the strengthening of the shekel, yet history tells us it’s only in front of him,” Levi de Leumi said.
This is because shekel is based on the forged foundations of the Israeli economy, said Bahar de Hapoalim. The country has a giant existing account surplus on the bill balance because its exports exceed imports, mainly due to its strong high-tech industry. Natural fuel production from its giant fields since 2013 has also helped reduce energy imports, he said, and family savings in Israel, whether savings and pension plans, are high, all of which have an effect on the nation’s existing account. giving it a surplus.
“This existing account surplus scenario in the invoice balance is not transient, it is structural, the basis of our economy. It may not be replaced so quickly,” Bahar said.
Indeed, the nation’s strong foundations deserve to continue to stimulate shekel even in the years to come, Bahar said. “Basics of a strong shekel, ” he said. We hope it will be even more powerful in two years “short-term fluctuations will be basically affected by the functionality of global equity markets. “
Leumi Bank expects shekel for industry between NIS 3. 30 and NIS 3. 50 to be consistent with the dollar on average until the end of 2021, based on money market volatility and political and economic developments.
Strong shekel is smart for Israeli consumers, Bahar said. This allows them to buy cars, TVs and abroad at a low price. But this is seriously affecting exporters, and the Bank of Israel is intervening in the market to help ensure that entire industries suffering from the exchange rate are “not eliminated” because it will be too profitable to manufacture here.
The coronavirus pandemic, with the devastation and recession it has caused, has exacerbated the difficulties of Israeli brands and exporters.
“We feel like a forceps effect,” said Netanel Haiman, head of the economic department of the Israel Manufacturers Association. “We’re getting it anyway,” with a global call to cut back because of the recession, adding unrest to corporations already. suffering with low competitiveness due to shekel.
“This can push other people to set up their production facilities abroad,” he said.
“The fall in the dollar is deepening the crisis and further damaging the survival chances of Israeli exporters,” the industrialists said in a letter they sent last month to the finance minister, calling on the ministry to reduce exporters’ costs. reduce water, energy and communal expenditures
The Bank of Israel could also simply intervene more aggressively in the market, Haiman said; you may simply “be crazier” and ask the market more than you have lately, to make it clear that it will not constitute a new appreciation of the currency.
“We are with the Ministry of Finance and the Bank of Israel,” he said.
Supporting brands and exporters is a key way for Israel to get out of the coronavirus-induced crisis, he said, and get others back to normal at a time when the country is facing record levels of unemployment.
Labor surveys conducted through the Central Bureau of Statistics have shown that the ‘general unemployment rate’, which includes the unemployed, those temporarily absent from COVID-19 paintings and those who are not disabled between March and July. paintings, about 12% in July for others over the age of 15 or older, the Bank of Israel said.
“It’s an employment crisis,” Haiman said, strengthening the will will create the engine to get us out of this crisis. “