With the shekel-dollar rate close to a 3-year peak, foreign exchange traders are asking themselves whether the trend of the dollar strengthening against the other major currencies, and against the shekel, will continue, and whether we will shortly see an exchange rate of four shekels to the dollar.
Joseph (Yossi) Fraiman, CEO of investment group Prico, attempts to answer this question for “Globes”. “The shekel-dollar exchange rate is at a two-year high, with the escalation in the crisis in Europe giving a following wind to the trend of the strengthening of the US currency, on world markets and locally.”
Fraiman argues that the strengthening of the dollar on the local market is a mirror image of the fall in the euro rate against the main currencies, with the steep rise in yields on Italian and Spanish government bonds indicating a flight from the euro.
“Investors are proceeding on the assumption that the worst in Europe is still ahead of us, with even a scenario of a redrawing of the euro bloc becoming a real possibility. In the light of this, traders around the world are unwinding euro-denominated positions, and switching to islands of safety such as the US dollar and the yen,” Fraiman says.
A further element on which Fraiman commented is the threat to Israeli exports. “It’s important to understand that 40% of Israel’s exports go to Europe. Israeli exporters are exposed to considerable risk of sharp downward movements in the euro eroding their receipts,” he says.
“At the present stage, the shekel-dollar rate will have to consolidate above 3.95 to signal a move towards NIS 4/$ or more. However, supply of foreign currency from foreign banks and from exporters around NIS 3.93-3.96/$ can be expected to moderate or halt the rise in the exchange rate.,” Fraiman adds.