Shekel-Dollar Turnaround Could Be Here to Stay

Market analysts were noting on Monday a turnaround in the shekel-dollar exhange rate that is likely to herald a longterm trend, Globes reported.

In its market review on Monday, FXCM Israel attributed the change to a number of factors:

“The shekel-dollar exchange rate rose by 4.3% in August, and signs are multiplying, both technical and fundamental, indicating that this is the start of a significant turnaround in the exchange rate trend, which has been almost uninterruptedly downwards in the past few years. The turnaround is based not only on the weakness of the shekel, but also on the strength of the dollar.

“After the sharp upturn at the beginning of last week that followed the surprise interest rate cut by the Bank of Israel, for most of the week the shekel-dollar rate marked time slightly above NIS 3.56/$, which could signal a downward correction in the next few days. If this happens, the correction will help us to estimate the strength of the current turnaround. The most important support level is at NIS 3.55/$. A fall below this level could encourage the short players again and extend the correction. On the other hand, a rise above NIS 3.58/$ could give the signal for the next jump.

FXCM stressed the sensitivity of monetary trends to political/fiscal uncertainties, as well.

“Locally, investors will focus this week on the budget discussions, against the background of the Governor of the Bank of Israel’s call to avoid a rise in the fiscal deficit. The shekel is currently very sensitive to any economic or political development. Rapid passage of the budget, which will also confirm the stability of the coalition, will help to stabilize the shekel. But if the passage of the budget encounters difficulties and exposes cracks in the government, this is liable to have an adverse effect on the shekel.

In addition, the durability of the ceasefire with Hamas will influence trading. “Every development in the talks between Israel and Hamas will affect the local foreign exchange market,” FXCM said.

But the global trend can’t be ignored, either. “The dollar continues to strengthen, with the global index reaching its highest level last week since September 2013. The fact that the dollar is strengthening despite the rise in stock prices on Wall Street brings home the fundamental nature of the change in the dollar trend on world markets.

“The main event in the U.S. economic calendar this week is the employment report that will be released on Friday and is expected to show about 200,000 additional jobs in August. The unemployment rate is expected to decline from 6.2% to 6.1%. Continued improvement in the labor market strengthens the assessments that the Federal Reserve will raise interest rates earlier than had been expected, and this is boosting the dollar globally, and against the shekel as well.”

The shekel-dollar rate as of late Monday was NIS 3.5750/$, while the shekel-euro rate was down 0.18%, at NIS 4.6971/€.

This article appeared in print on page 6 of the September 2nd, 2014 edition of Hamodia.