The HSBC bank has joined currency experts including the Bank of Israel who say the shekels is significantly overvalued and that the exchange rate with the dollar was soon show a correction, Globes reported on Sunday.
HSBC, a London-based global bank, had been predicting the shekel would continue to muscle aside the dollar and other currencies, but shifted field and said the shekel-dollar exchange rate will likely reach NIS 3.51/$, and recommended that its customers buy dollars.
The bank bases its view on its assessment that the Bank of Israel will not allow the shekel-dollar exchange rate to fall below NIS 3.40/$.
“Although there are still no signs that the strengthening trend of the shekel against the dollar has come to an end, we believe that in the short term, a substantial correction is likely, given the very low exchange rate,” HSBC writes.
In a paper sent to investors, HSBC’s analysts wrote: “The NIS 3.40/$ exchange rate level is critical. We remind you that in the past, the Bank of Israel responded very aggressively when a breakthrough of the NIS 3.40/$ rate appeared likely – the Bank of Israel twice unexpectedly cut its interest rate and bought large quantities of dollars.”
Despite rumors of BOI intervention, market sources said that no purchases by the central bank were observed.
The latest posting of the shekel-dollar exchange rate was NIS 3.4121/$.