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 | March 1, 2009
After moving almost non-stop from 3.2 -4.2, the Shekel has spiked the last few days as once again people get nervous over the US dollar. Currently trading after hours at 4.075, the shekel has joined most trading alone.of the worlds other currency’s, to route the greenback. In fact the euro is up more than 3% against the dollar in today’s global trade.
The question is whether we are in for another round of dollar weakness, or is this some profit taking as traders unwind their positions.
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 | January 26, 2009
The Bank of Israel has just lowered interest rates by 0.75%, to a record low of 1%. This is a sign that they think that the Israeli economy is slowing much faster than originally thought. The Shekel is actually trading slightly higher in after hours trading on the news.
