Swiss banking giant, UBS, put out a call that was negative on the Shekel. The bank said that while they believe Israel wont slip into a recession, and will continue with positive GDP growth, that growth will be much slower than in previous years, and that will adversely impact the Israeli currency.
According to a Jpost report: “The shekel traded near a one-month low against the dollar after Roderick Ngotho, a UBS strategist in London, wrote that Israel is “facing both internal and external pressures,” and may feel the “most pain during this year’s global recession. We expect the US to register a recession this year and though we do not expect Israel to be in recession, we anticipate very low growth at 1 percent this year, the lowest in seven years,” he wrote in a note to clients. “We remain negative on
the shekel.”
Maybe so, but positive growth sure looks good these days.
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.
