Shekel Shocker: Analyst Says Exchange Rate Could Fall to 3.0

An Israeli market analyst said on Wednesday that the dollar/shekel exchange rate could sink to a record low of 3.0 in the coming months, but will rebound once the pandemic is over.

Shmuel Berger of Berger Finance Research told Globes: “This is the equation – markets rise and the dollar falls. In the short term this trend will continue with the markets continuing to rise and the dollar continuing to fall. I don’t rule out an exchange rate of NIS $3.00/$ and NIS 3.80/€.

However, Berger believes that the situation is only temporary, due to the pandemic, and he’s optimistic for the long run: “On the day that it becomes clear that the vaccinations have eliminated the virus as a fact, the markets will fall and the required correction will happen and then we will see the dollar-shekel rate back up to NIS 3.50/$ and perhaps even more.”

When asked why the stock market has performed so well despite the virus and its economic fallout, Berger replied: “The capital markets see the virus as a passing episode that has increased the use of technology, online and generally. For the markets, the range of a year until the end of Covid-19 even represents an incentive to move higher.”

The low interest rate is another factor. “Institutional bodies around the world have no alternative to investing large amounts and the money continues to flow every month and is new fuel for buying shares, bonds, and every other investment in the capital markets in various financial instruments.”

The world’s central banks have contributed to the trend, by signalling their unlimited support. “The central banks and governments are broadcasting in every possible way to the world that investors are not walking alone and injecting money into the banks, to businesses and even directly into the pockets of the public,” he said.

On Wednesday, the rate slipped further below the 3.3 threshold, as the Bank of Israel set the representative rate at NIS 3.289/$, down 0.454% from Tuesday. It marked the sixth straight session in which the shekel has gained against the U.S. currency.