Shekel opens mixed

shekels
shekels

Prico CEO Yossi Fraiman: The Bank of Israel will have to act to prevent a flood of cheap imports and factory closures.

The shekel is mixed has against the major currencies at the opening of trading on the foreign exchange market this morning. The shekel-dollar exchange rate is currently up 0.15% in comparison with Friday's representative rate, at NIS 3.887/$, and the shekel-euro rate is down 0.3%, at NIS 4.3327/€.

Prico Group CEO Yossi Fraiman writes in his morning market review: "Trading in Asia has been in a narrow range with volumes low because of the new year in China and other countries of the region. Traders will be in waiting mode this week in anticipation of the testimony by US Federal Reserve chair Janet Yellen in the US Congress on Wednesday and Thursday. The markets expect hints about the future of US interest rates. Last week, because of fears of an economic slowdown in the US and a crisis on the bond market in the wake of the fall in oil and gas prices, the assessment has grown that US dollar rates will not be raised in the coming year, and dollar exchange rates fell sharply, with the dollar index (DXY) posting a 2.5% drop.

"The fear of the effects of the economic slowdown in China finds expression in energy and raw materials prices, while on the other hand the labor market in the US is recovering, and monetary policy will be the main burden of what Yellen has to say.

"In the local arena, the sale of holdings by speculators who bought dollars in the past month, alongside sales by exporters to meet tax and wage payments in shekels, led to surplus supply of dollars and appreciation of the shekel. In our view, the potential for the shekel to appreciate is limited to movement in the NIS 3.85-3.88/$ range. So far, it has been halted in the NIS 3.86-3.89/$ range. Looking at the first quarter of 2016, there is no change in our view that the shekel-dollar pair is likely to test the NIS 3.98-4.02/$ range. Looking at the long term, in our view movement of foreign capital in direct investment in Israel and structural foreign currency supply from exporters, at a time of decline in demand and low raw material and energy prices, support surplus foreign currency supply and appreciation of the shekel towards lows in the shekel-dollar rate below NIS 3.80/$.

"The Bank of Israel, which has to act as the responsible adult, will be required to return to active intervention to prevent sharp appreciation in the nominal effective rate, the anchor rate for the Bank of Israel in determining policy. In our view, the weakness of the euro against the dollar at a time when the shekel-dollar rate is at NIS 3.88/$ or less, will necessitate action by the Bank of Israel with the aim of maintaining Israel's terms of trade and preventing a flood of cheap imports and the flight of manufacturing capacity from Israel abroad, damaging the bank's employment and growth targets."

Published by Globes [online], Israel business news - www.globes-online.com - on February 8, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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