Shekel ended July the strongest against the dollar in more than six months. The Israeli bank today lowered the representative exchange rate of the shekel by 0.339% to 3,333 NIS, the strongest since January 19, a few days after the central bank announced that it would buy 20 billion dollars in foreign currency in 2021.
The shekel has also been trading at six-month highs against the euro and other major currencies. The Israeli bank today reduced the shekel in euros by 0.065% to 3,849 NIS / €.
In futures trading in the afternoon, the shekel strengthened by an additional 0.09% against the dollar against 3,230 NIS / USD and by 0.25% against the euro to 3,839 NIS / €.
The strengthening of the shekel against most of the world’s leading currencies has once again raised concerns about Israeli exports, especially as the Bank of Israel may not continue to buy large amounts of foreign currency. The Israeli bank bought $ 25 billion in foreign currency in the first half of 2021. While acknowledging it is likely to exceed the planned $ 30 billion for the full 2021, foreign exchange purchases are expected to be significantly reduced in the second half of the year.
Shekel strengthened as the inflow of foreign currency into the Israeli economy from abroad intensified, causing a sharp appreciation of the Israeli currency. Israel’s current account surplus has risen, direct investment in Israel has risen, Israeli investment institutions have sold large amounts of foreign exchange for the profitability of their investments in foreign capital markets, and foreign investors have bought Israeli government bonds.
Although Israeli exports rose despite the appreciation of the shekel, since the beginning of January, during the third closing, the Monetary Board of the Bank of Israel has expressed concern that exports will be affected at some stage. Monetary Board members believe that export companies will be forced to close, including small businesses.
However, Mizrahi-Tefahot chief strategist Modi Shafrir said: “The Israeli bank must moderate purchases because on the other side of the coin there are those damaged by the Bank of Israel’s decision to stop the appreciation of the shekel in 2021. That the shekel, for example, is 3.15 NIS / $ – which would have been the case if there had been no mass intervention in the last year – then there would have been less pressure on prices in terms of imports or prices abroad, which jumped.The Israeli bank has launched a program to help exporters, but circumstances seem to have changed. in the economy have changed since then. “
He added: “The Bank of Israel indicated last week that the foreign exchange purchase program would cease and operate in the foreign exchange market from time to time. The Bank of Israel program was a special program for a special situation. The purchase program stopped the appreciation of 2021. improved, it appears that the Bank of Israel will complete its program at the end of 2021 and will buy foreign currency next year according to the state of the economy, as happened earlier.Israel will buy foreign currency in 2022, but the purchase will moderate as the situation that does not justify it. “
Shafrir explained, “What led to the re-strengthening of the shekel was the rise in stock markets around the world, which led to the majority of foreign exchange sales by institutional investors, along with core forces supporting str4ong shekel as a significant current account surplus and sudden strong shekel is good for consumers in Israel because it reduces the cost of living and lowers the prices of goods and shipping.Importers absorb part of the price increase while on the other hand, high-tech exporters have no reason to worry, and low-tech exports (which harms a strong shekel) has also risen recently. “
Posted by Globes, business news in Israel – en.globes.co.il – July 30, 2021
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