Dollar Surge May Benefit Israeli Stocks That Trade in the U.S.
Written by: Aaron Katsman | June 4, 2008
Aaron Katsman
IsraelNewsletter.com
Federal Reserve chairman Ben Bernanke’s tough talk on the US Dollar helped support the greenback against the major global currencies, but it caused a minor rally against the Israeli shekel. As a reminder, the shekel has been one of the world’s strongest currencies over the last year, and its strength, while serving as a seal of approval on the state of the Israeli economy, has crushed exporters as well as many Israeli hi-tech’s that sell globally but keep their R&D local, due to the fact that their expense line has increased from the currency differential.
Many local market participants were wondering just how low the dollar could go. While IOI is not calling a bottom, we do think that chances are quite good that we will see a continued dollar appreciation against the shekel. Keep in mind that we have see a 3.5% move in the last 4 trading days.
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 dollar run could potentially have positive ramifications on earnings for these companies.
Fundamentally, Israel, like many other emerging economies, is experiencing surging inflation, never a positive for a currency. On a technical level, we could potentially see a lot of short covering on shekel positions, thus exaggerating the dollar’s move higher.
Disclosure: Author’s fund has no position in any stock mentioned as of 6/4/08.
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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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