Without much fanfare or notice, the US dollar is continuing its strong turnaround against the Israeli Shekel. It wasn’t to long ago that the greenback fell, intraday, to 3.21 against the Shekel. Today the Dollar is up to over 3.58 against the Israeli currency.

Why? Some will point to continued Bank of Israel intervention in the forex market. It’s one thing to say that they can impact the market for a day or two. It’s quite another thing to say that they can continue to impact a currency for a few weeks continuously.

I think that a bit of rationale has come back to the market. There really was no reason that the Shekel was so strong. How could it be that when Iran tested their missiles a month or so ago, that the Shekel actually strengthened? The Iranians were testing missiles that could threaten Israel’s very existence, and the local currency got stronger? Hard to believe.

Additionally, with investors realizing that the US isn’t going out of business and the fact that recent economic data coming out of Israel shows the beginnings of a slowing currency, the market is in the midst of repricing the Shekel to bring it more in line to where it actually should be in relation to the USD.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

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.

Share with others:

What to do about the strong Shekel? That is a question I hear about 10 times a day form my clients. Everyone has been talking about the impact the strong local currency has had on the economy. The Bank of Israel has even attempted intervening in the currency markets, mostly with little success. So what to do? Let the free market work its magic.

Once again we see how market forces are able to correct short-term imbalances. Over the last week the US Dollar has surged more than 6% against the Shekel. Part of this was due to BOI intervention, but most of the impact has come from two large Israeli companies taking advantage of a strong currency to make very large foreign acquisitions.

Teva Pharmaceuticals (TEVA) $7.5 billion acquisition of Barr (BRL) and Koor Industries $900 million investment into Credit Suisse (CS) has sparked Dollar buying by these acquiring firms to complete the deals. According to a Globes article: ” Bank Leumi will provide Teva with $1.8 billion in financing, is expected to boost domestic demand for foreign currency. Capital market sources say that Teva has been buying dollars on a large scale in the past few days for the acquisition. In addition, IDB Holding Corp. Ltd.  subsidiary Koor Industries Ltd.’s announced that it plans to double its investment in Credit Suisse Group to NIS 3 billion, and has also been buying foreign currency for this purpose.”

We have also recently seen European companies buying up American firms, for the same reason. They also have a strong currency and want to get good deals. Be it Genentech (DNA) or Anheuser-Busch (BUD) while their price tags were massive, the acquiring firm actually bought these companies for a 20-30% discount in local currency. Now they need to go out and get the Dollars to complete the deal. This should help the greenback as well.

The lesson we can learn: leave markets alone, and let them do their thing, and ultimately, aberrations will work themselves out.

Aaron Katsman, IsraelNewsletter.com

Disclosure: Author’s fund has a position in TEVA as of 7/23/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

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.

Share with others:

Aaron Katsman
IsraelNewsletter.com

In what has been an extremely volatile trading session, which has seen the shekel trade near the 3.21 level against the US dollar, news that Bank of Israel Governor Stanley Fischer has increased the level of BOI intervention in the currency market has sent the dollar surging by more than 2.25%. The BOI announced that it will increase it’s buy-up of the greenback to a $100 million a day.

The continued rise in the Shekel has defied all logic. Even yesterday, the shekel strengthened by more than 1%, as Iran announced the testing of missiles that have the range to hit Israel. Under normal market conditions that news would have sent the Shekel reeling, but it just didn’t happen.

Let’s see if fundamental reasoning returns to the local currency market on the heels of the BOI move, or if this move is just a knee-jerk reaction that will reverse in the next few days.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

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.

Share with others:

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.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

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.

Share with others: