Currency Intervention Pays for Anniversary Dinner!
Written by: Aaron Katsman | March 14, 2008
Aaron Katsman
www.IsraelNewsletter.com
I would like to start by taking this opportunity to wish my wife, Yael “Nefesh B’Nefesh” Katsman, a belated happy anniversary. Our anniversary was actually yesterday, and NO I didn’t forget, we had a tasty dinner, I just didn’t mention it in the blog. Give me a little credit.
The big news of the last 24 hours is the intervention in the currency market by the Bank of Israel (BOI). Yesterday afternoon in after-market trading the Shekel/USD rate fell to approximately 3.34. Then came the news that the BOI was intervening for the first time in more than a decade, and that send the greenback back up more than 1.5%. Today, the BOI announced more intervention, and that is helping the dollar even more. Local media reports have said that the BOI wants to get the exchange rate back to at least 3.60, which is about 4% high than today.
Why the sudden move by the BOI? The shekel has been the second strongest currency in the world YTD, and the impact on exporters has been huge. Losses continue to mount for them, and the BOI needed to do something.
This move could have profound impact on some Israeli stocks that trade in the US. Companies like Alvarion (ALVR), Nice Systems(NICE), Amdocs(DOX), all do R&D in Israel and their expense lines have increased due to the strength of the shekel. The recent BOI intervention could potentially have positive ramifications on earnings for these companies.
Disclosure: Author’s fund holds a position in ALVR, NICE and DOX. He has no position in any other stock mentioned as of 3/14/08.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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