Shekel strengthens further

Shekels Photo: Shutterstock
Shekels Photo: Shutterstock

FXCM Israel: The low exchange rate against the US dollar represents a problem for the Israeli economy.

The shekel has strengthened against the major currencies this morning. The shekel-dollar exchange rate is currently down 0.4% in comparison with Friday's representative rate, at NIS 3.7010/$, and the shekel-euro rate is down 0.78%, at NIS 3.9261/€.

FXCM Israel says in its market review this morning, "The dollar-shekel pair continues to sink and is testing the key psychological level of NIS 3.70/$. After posting a fifth negative week out of six last week, the pair is now at its lowest since October 2014, despite the relative stability of the US dollar on world markets thanks to a degree of support from the inflation and retail sales figures released in the US last week.

"Such a low exchange rate represents a problem for the Israeli economy, since it adversely affects the competitiveness of exporters. The Bank of Israel has intervened in trading in the past few weeks, but to no effect. We may see the Bank of Israel taking advantage of the significant NIS 3.70/$ level to intervene one more time.

"The pair is extremely oversold, and we may see slightly higher demand this week from speculators seeking to exploit the low price of the dollar to set off an upward correction.

"Today's trading volumes will be thin because of the Presidents' Day holiday in the US. The US economic diary for this week is fairly empty, apart from the minutes of the last meeting of the Federal Open Market Committee, which could shed more light on the Federal Reserve's intentions.

"Globally, the main concern at present in the upcoming presidential election in France and the fear that far-right candidate Marine Le Pen might come to power because of the weakness of the left and the legal problems of the center-right candidate. A victory for Le Pen, who is opposed to the euro bloc and who hold isolationist positions, could cause a chain reaction in the bloc and send yields on European government bonds sharply higher."

Published by Globes [online], Israel business news - www.globes-online.com - on February 20, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Shekels Photo: Shutterstock
Shekels Photo: Shutterstock
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