The shekel-dollar rate hit a new two-year Monday morning, rising above 3.91 shekels to the dollar.
In July, the rate was around 3.40 with projections for its going even lower.
FXCM Israel, quoted by Globes, explained Monday, “The shekel-dollar exchange rate is not stopping and reaches new peaks almost daily….
“It seems that sentiment towards the shekel is at an unprecedented low, both because of the deteriorating security situation and because of the signs that the coalition is breaking up and the election atmosphere that is taking over the political arena. All this arouses concern on the market.
“The local market seems dominated by buyers only: on the one hand, those long on the dollar are not rushing to take profits, despite the price levels, while in current conditions no-one dares buy the shekel, even when there are technical opportunities for doing so. We are thus witness to a completely one-sided market.”
It concludes that in the long term, “There is no escaping the view that this trend will continue, both because of the gap in economic growth between the US and Israel, and because of the fact that the U.S. Federal Reserve is expected to start toughening its interest rate policy, whereas the Bank of Israel, in current conditions, is expected to leave its interest rate at virtual zero for a prolonged period.
However, the Swiss USB bank wrote last week that while it sees the rate rising to 4 shekels to the dollar by mid-2015,,” Israel’s strong balance of payments should stem the depreciation in the medium term.”
Financial advisers have a habit of predicting the future based on the past and are not very good at calling a change indirection.
If the Israeli government coalition holds and early elections are not called, that could help brake the one-way trip for the currency.Tzvi Ben-Gedalyahu