Economists: Dollar-Shekel Rate Could Be First ‘Victim’ of a Trump Win

The long-term consequences of a Hillary Clinton or Donald Trump presidency will not be known until some time has passed, but for residents of Israel who depend on dollar payments, the consequences are likely to be immediate: A victory for the former will mean business as usual, but if the latter wins, the dollar is likely to sink against the shekel, at least temporarily, according to economists.

“The dollar lost 6.5 agurot over the last week, and opened on Sunday just above NIS 3.8, the lowest level since mid-October, as the polls showed a tightening of the race,” economists for FXCM, an Israeli foreign currency analysis firm, told Globes. “The value of the dollar worldwide has also sunk, and this was due to the tightening of the polls indicating that the results of the election were still open.”

At the close of business on Monday, the dollar had rallied somewhat, closing at NIS 3.813, after final polls showed Clinton with a slight advantage.

A Trump victory could have a significant effect on the markets, the economists said, leading to a fall not only in the value of the dollar, but in the stock markets as well. If that happens, an interest rate hike by the Fed would likely be off the table altogether, further weakening the dollar, and reigniting the currency wars that have seen interest rates slashed around the world as countries seek advantages in the export markets.

That could force the Bank of Israel to once again step up its purchases of dollars in order to keep the shekel rate at a reasonable level, as a too-valuable shekel hurts exporters who have fixed shekel costs but earn less in shekel terms when they sell their products abroad for dollars.

Stock markets as well have been rising and falling in accordance with the polls. As far as the dollar is concerned, a Trump win would call into question many of the basic foundations of international trade, including current international trade agreements and the level of Treasury bill sales to foreign buyers, among other factors. As markets seek stability, the economists said, investors would likely hold off on moves until the path that Trump plans to take matches the rhetoric of his campaign, or if he moderates his stated policies on challenging trade agreements with countries like China and Mexico. With Clinton, on the other hand, “markets expect more of the same” and a continuation of the current economic situation – thus likely rallying the markets and boosting the value of the dollar, the economists said.

According to economist Idan Azulai of the Epsilon investment house, the markets are also responding to the prospects of the Congressional elections. “Even if Clinton wins and the Congress remains Republican, it will make it more difficult for her to act. I would expect the current swings to continue due to the insecurity among investors as to the future,” he said.