Barclays Capital came out predicting a quick end to the shallow Israeli recession, and a return to decent growth of 2.9%  by next year.  Keep in mind that the Israeli economy was late to the ‘recession game’ and looks to be an early ‘exiter’ from economic turmoil as well.

With all this great news Barclays said that they expect an Israeli Shekel/USD exchange rate of 3.65 buy the end of the year. That’s a big move from the 3.93 area that the currency is trading at now.

According to Globes: “Barclays sees a less severe recession in Israel, and relatively quick growth recovery. The investment house bases its optimism on the fact that about 75% of Israeli exports are high-tech goods, and Barclays says that a rise in the Tech-Pulse Index - showing a US high-tech recovery - points to stronger Israeli exports. The Tech-Pulse Index, measured by the San Francisco branch of the US Federal Reserve, tracks the US information technology sector.”

It looks like we have started to see this happen. As Tech has led the stock market turnaround in the US, Israeli stocks that trade in the US have been flying, up over 33% this year. Keep in mind that, like it or no, President Obama’s push for alternative energy sources will be huge for Israel, as Israel is one of the big global players in cleantech and water technology. If this trend of a ‘tech led recovery’ continues, look for the Israeli hi-tech scene, from small and mid-cap tech plays on the NASDAQ to M&A to Israeli VC, to have a very strong 2nd half of ‘09, and lights out for 2010.

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It was only a few weeks ago that market pundits were predicting the US Dollar to reach 4.5 against the Israeli Shekel. Well what sayeth you pundits now?

Can you say 3.89???? Giddy up. The Shekel, like most other currencies continue to soar as President Obama continues to print money. We have seen a 7% fall in the USD/NIS rate in less than a month. Didn’t Obama say that he wanted a strong greenback?

It’s not exactly like the Israeli economy is on fire. This is clearly a USD story and doesn’t have much to do with the Shekel. As long as we continue to see businesses become nationalized, and the US Mint working 24/7, this has the potential to become a bigger and longer trend.

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The US dollar is flying by almost 2% against the Shekel this evening after the Bank of Israel said that they were stepping up the purchase of foreign currency.

According to Globes: “The central bank says it will buy government bonds to the tune of NIS 200 million daily, and will continue its program of expanding the foreign currency reserves at an average rate of $100 million daily.”

Why the need to weaken the Shekel? It has already dropped buy almost 30% in the last 6-9 months against the greenback. Trying to ignite an economy via inflation is bad news. Come to think of it wasn’t current BOI head Stanley Fischer head of the IMF back during the Asian, Russian and Latin American financial crises at the end of the ’90’s? Isn’t this a similar policy to what he recommended then? If so, look out. I sure hope that speculators don’t drive down the Shekel, like they did to Asian currencies 11 years ago.

How about a strong currency and to attract foreign investment, and lower taxes to help ignite long term growth?

Fischer is playing with fire, and if his track record is any indication, look out!

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The Israeli Shekel continued it’s huge spike against the US dollar this week, rising more than 4%, as news that the US Federal Reserve will buy bonds. According to Globes: “The shekel-dollar exchange rate is down 1.84% to NIS 4.048/$, and the shekel-euro rate is up 2.13% at NIS 5.521/€. The US Federal Reserve Bank yesterday left its Fed Funds rate unchanged, as expected, but surprised many investors and economists in announcing its will buy about $1 trillion in securities - $300 billion of US government bonds as well as $750 billion mortgage-backed securities. The move is intended to lower longer term interest rates and support the US economy. The move pushed Wall Street to rises yesterday, and has pressured the dollar on global markets.”

It’s sure nice to be able print money at will, and heck, those that are currently printing will be long gone when the children and grandchildren have to pay the piper.

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