Exchange Rate Outlook Remains Gloomy

The rate stood at NIS 3.4520/$ after hitting a three-year low of NIS 3.43/$ last week.

FXCM, Israel’s research department, said on Monday morning that “the outlook looks fairly gloomy, because of the globally negative sentiment towards the dollar. The decline of the dollar in the past few weeks is an expression of disappointment on the part of investors worldwide both in the pace of recovery of the U.S. economy and at the realization that the U.S. Federal Reserve is still not considering an interest rate rise.

“The new lows that the dollar has reached again arouse fears in Israel of a severe blow to exports and to the economy as a whole, and the more the depreciation of the dollar continues, the greater will be the pressure on the Bank of Israel to act. Although the dollar has weakened against all the major currencies, there is no currency against which it is at such a low as it is against the shekel, which brings home the relative strength of the shekel on world markets.”

Nonetheless, FXCM estimates that the shekel-dollar pair is oversold, and that some degree of correction should be seen in the near term. “The pair will try to stay above NIS 3.45/$ and climb towards NIS 3.47/$, but at the moment it’s hard to point to a possibility of a more substantial correction, and in the end the pair will fall to new lows,” FXCM writes.

This article appeared in print on page 6 of the May 13th, 2014 edition of Hamodia.