Shekel Headed for 3.55?


Despite intervention by the Bank of Israel on Wednesday, the shekel continued to strengthen against the dollar and euro in interbank trading.

The shekel-dollar exchange rate was down on Thursday 0.21% at NIS 3.566/$, and the shekel-euro rate was down 0.44% at NIS 4.711/€, Globes reported.

The bank’s purchase of $100 million — the second intervention in April — did not brake the dollar’s slide.

Furthermore, FXCM Israel said that Warren Buffett’s acquisition of 100 percent of the precision-cutting-tools company Iscar for $2.05 billion will likely also drive the shekel upward. It will probably attract investor attention to Israel, increase confidence in the Israeli economy, enhance its image, and strengthen the shekel even more.

FXCM Israel said, “These factors are likely to have taken the sting out of the Bank of Israel’s limited intervention, and the dollar has weakened against the shekel for nine consecutive days, with NIS 3.56/$ and NIS 3.55/$ as the coming support levels.

“It’s difficult seeing the Bank of Israel being able to bring about change in the foreign exchange market. The Bank will remain on the side for now or reduce to a symbolic minimum the scope of intervention and wait for a more fit time, or intervene at a lower rate, around NIS 3.5/$. At current prices, the market won’t agree to change direction.”

Trade analysts also say that investors anticipating Fischer’s departure are exploiting the situation. In the past, dollar purchases authorized by Bank of Israel governor Stanley Fischer were much larger and were accompanied by strong rhetoric indicating that he was determined to keep the shekel-dollar balance. The bank’s recent actions have been weak and hesitant by comparison, and may actually have hurt the dollar more than helped.

“Perhaps the very fact that the governor is finishing in his role soon hits the ability to halt the speculators’ attack. If the Bank of Israel does not intervene soon,  the next level to test it will be NIS 3.55/$.”