In their weekly foreign currency survey, Union Bank of Israel (TASE: UNON) economists predict that the shekel and other important currencies worldwide will weaken against the dollar in the medium and long term. The main reasons are interest rate differences between the US and the rest of the world, with the interest rate in the US slated to rise moderately and cautiously, and the relative strength of the US economy, compared with the rest of the world.
Union Bank adds, "The shekel is affected by three principal factors: oil and gas transactions, various exits, and strong growth. These three factors have recently strengthened the shekel against the dollar, but in the long term, this gap is likely to narrow, due to both the anticipated interest rate raises in the US in comparison with Israel and the difference in inflation rates and the targets for interest rate increases set by the Bank of Israel and the US Federal Reserve Board."
However, for the time being the shekel continues to strengthen. In futures trading the shekel has strengthened 0.41% against the dollar to NIS 3.512/$, a new three year low, and 0.15% against the euro to NIS 3.933/€.
Union Bank also commented on the stock market, writing, "The recommended share exposure in a representative portfolio is 18%, or 36% in a speculative portfolio. In the composition of shares, we recommend an equal division between Israel and overseas. With respect to geographic exposure overseas, our preference is for the US, with an emphasis on sectors likely to continue benefiting from the relative strength of the US economy. At the same time, we recommend profit taking and diversion of 2% from the US to Europe, so that the recommended geographic distribution for overseas shares is reducing the proportion in the US from 60% to 58%, increasing the proportion in Europe from 20% to 22%, 9% in Japan, and 11% in Asia, excluding Japan."
Published by Globes [online], Israel Business News - www.globes-online.com - on June 18, 2017
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