Written by: Aaron Katsman | February 20, 2009
Bank of Israel Governor Stanley Fischer, hinted that the central bank may stop intervening in the forex market. The central bank has been buying dollars for months now trying to send a signal to the market that the shekel should depreciate. While I don’t think it was the intervention that has weakened the shekel, the fact is that the shekel has weakened by almost 30% from the high.
According to Globes: “Fischer also implied that the Bank of Israel’s dollar purchase plan was drawing to a close. “We must weigh the future of the dollar purchase plan.” Fischer continued, “In January 2010, we’ll still be under the inflation target for the preceding 12 months. The 12-month inflation rate will plummet from 5% as of October 2008 to minus 0.4% in October 2009. Inflation this year will again undershoot the target, that is too low.”
Fischer continued to paint a fairly rosy picture of the Israeli economy. He has been doing this for months, even as economic data has proved otherwise. let’s hope he is finally right.
Written by: Aaron Katsman | August 8, 2008
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.
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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.
