Written by: Aaron Katsman | March 25, 2009
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!
Written by: Aaron Katsman | June 5, 2008
Aaron Katsman
IsraelNewsletter.com
I posted yesterday about how a strengthening US Dollar could potentially benefit Israeli stocks that trade in the US. I was asked by some readers how come I think that the USD is poised for a rally? The answer…FIFO. FIFO is an accounting term that stands for ‘first in first out.’ With the global economy on the skids, the US was the first country to start having problems and with a vigilant Fed at the wheel, I think the US will return to normal growth in the next 6 months. After all, no recession occurred. The US has had no negative GDP growth quarters, and actually had a surprisingly good 0.9% GDP for Q1. Europe on the other hand, is just starting to show signs of a slowdown. I have heard analysts predicting a potential contraction of over 2% in European growth. That certainly will be bullish for the greenback.
I really think investors need to keep an eye on what’s happening in South East Asia. Asian stock markets like Vietnam rocked and rolled during 2006-07, unfortunately, steep market drops and a worsening economic situation may be a precursor to another Asian financial crisis like we had 11 years ago. Keep in mind that the Vietnam market has lost more than 55% during ‘08, and with inflation jumping, the currency has dropped. This isn’t just an issue in Vietnam. Countries like India, China, Philipines and Hong Kong are all in the midst of spiking inflation, and in the case of the Philipines and Thailand for example, sinking currencies. (Continue »)
