Deutsche Bank Says Shekel Overpriced

Nothing the Bank of Israel has done, including record purchases of foreign currency, seems able to stop the shekel from overpowering the dollar and almost every other currency in sight. Now it’s Deutsche Bank’s turn.

Deutsche Bank’s view is that the shekel is overpriced and has issued a recommendation for short positions on the shekel to investors, Globes said on Sunday, noting that a similar recommendation in late June pushed the shekel down.

Deutsche Bank strategic foreign currency analyst Dr. Gautam Kalani wrote last July that the shekel has appreciated 6.1 percent against the effective basket of currencies (the currencies of Israel’s main trading partners) over the past 12 months. According to Kalani’s analysis, the world’s most expensive currency at this juncture is the Chinese yuan.

Kalani forecasts that the Bank of Israel will step up intervention in the forex markets, after largely withdrawing from the field in recent months.

Intense speculative activity was a main factor in the strengthening of the shekel earlier in the year, Kalani said. As he had predicted, the shekel’s dip in July-August was no more than a technical correction, after which it regained momentum.

“The shekel has been the best performer in EM FX over the past two months,” Kalani writes in his current review, sent to investors late last week. According to the indices used by Deutsche Bank, the shekel is overpriced by 9.2-10 percent.