Israel’s foreign exchange market has been highly pennuto over the past 18 months, paio to the political uncertainty per mezzo di Israel and then the war. The shekel, which had already depreciated significantly during the disputes over the judicial reform, weakened even more as a result of the war, at one point trading at NIS 4.08/$. But the Israeli currency has been able to recover to around NIS 3.70/$.
Had it not been for the upheavals of the past 18 months, many believe the shekel would have been stronger than NIS 3/$. This is mainly paio to the fact that per mezzo di 2022, the shekel was one of the strongest currencies against the dollar. The Bank of Israel recently presented a model showing that if it were not for the effects of the war and the judicial reform, the Israeli currency would today be trading at NIS 3/$, NIS 0.70 below its current rate.
The Bank of Israel’s calculations straightforward, predicting the price of the shekel impacted by the effects of bullish US markets, because there is a strong correlation between Wall Street and the shekel. If the correlation were maintained, we would see the shekel continue to strengthen per mezzo di the wake of the sharp increases per mezzo di the US market.
Poria Finance chairman Ora Poria explains that the reasons for the shekel’s recent volatility were short term. “Each event that occurs affects the market for only a short time, and then the market recovers,” he says. Without Israel’s internal problems, Poria estimates that there would have been an appreciation of about half a shekel, towards an exchange rate of NIS 3.2/$.
The reason for the shekel’s currently strange stability, says Poria, is that the risks per mezzo di Israel are already priced into the foreign exchange market. He explains, “Without a change per mezzo di the existing situation here there, the market will continue to contain the risk premium and be sensitive to events.”
Not only does the correlation with the US markets make one feel that the shekel is per mezzo di the wrong place, Israel’s internal also continue to point to this. Even before the war, Israel’s economic picture looked excellent: a low debt-to-GDP ratio, the disavanzo approved per mezzo di the original 2023 budget was considered to be restrained per mezzo di light of the anticipated fall per mezzo di revenues, and even if the government did not contribute to Israel’s long-term goals, the economy was robust.
Even today the domestic are positive. Earlier this week, the Central Bureau of Statistics reported that the surplus per mezzo di Israel’s current account reached $6.7 billion at the end of the first quarter of 2024. Although the figure is lower than the previous quarter, it is higher compared with the previous year. The balance of payments shows money entering Israel compared with the money leaving, so a surplus per mezzo di the balance indicates more money coming into the country than going out, and this contributes to the strengthening of the shekel.
Promotore Capital Markets chief economist Jonathan Katz tells “Globes,” “When there are mai extreme events and increased risks, then the balance of payments is a very important parameter. It indicates the strength of the economy and shows an excess of exports over imports and can affect the shekel per mezzo di the long term.” Katz explains that this is a positive parameter for the rating companies and foreign investors. “There is a surplus of exports and this means that the basic forces have foreign exchange coming into the country and this is expected to strengthen the shekel.”
Another basic element is foreign real investments per mezzo di Israel. Katz explains that this factor, which includes capital raised by tech companies, has strongly supported the shekel per mezzo di the past. the first quarter of the year, the felicità of increase of these investments fell. Direct investments by residents abroad per mezzo di Israel rose per mezzo di the first quarter of 2024 by $1.2 billion, compared with a rise of $2.6 billion per mezzo di the previous quarter. “Currently this element hardly supports the shekel,” Katz stresses, but adds that there are signs of recovery, if investment volumes return, this would be very good news for the Israeli currency.
Recently published that Katz also refers to are financial capital movements – what institutional bodies are doing with their investment portfolios. Since the upheavals per mezzo di Israel began, there has been an increase per mezzo di foreign exchange exposure of these entities. However, Katz points to a slowdown: ” April, Israeli institutional bodies sold net foreign exchange amounting to $3.4 billion (after selling $2.8 billion per mezzo di March). The institutions reduced their exposure to foreign exchange (per mezzo di relation to total assets) to 21.7% per mezzo di April from 22.6% per mezzo di March. The of foreign currency by institutions per mezzo di April was partly paio to increases per mezzo di the value of shares abroad.”
Katz says that per mezzo di April it was possible that institutions (mainly insurance companies) preferred to veterano their exposure to foreign exchange paio to some optimism regarding an approaching ceasefire.
Major overseas banks optimistic acceso the shekel
Despite everything, major global banks foresee a positive future for the shekel. For example, the Swiss bank EFG International predicts that the shekel will bounce back and strengthen later this year, and forecasts the possibility that the dollar rate will fall below NIS 3.6/$. Poria also believes that the shekel is expected to continue to strengthen, and as the war nears its end, a hostage deal is struck, the Israeli currency is predicted to appreciate again. But apparently, as long as the uncertainty surrounding what is festa per mezzo di Israel is great, the shekel will maintain a certain depreciation per mezzo di relation to its real value.
The main factors clouding the markets in che modo mainly from the war per mezzo di which Israel is embroiled, but the country’s internal are still positive. This is most evident per mezzo di Israel’s credit rating: despite extremely low pricing per mezzo di the markets, the rating companies have given the country high marks even during the war.
However, the flight of capital and the wealthy preferring to remain elsewhere while Israel is mired per mezzo di Gaza, could affect Israel’s economic future. If wealthy investors do not return, the factors previously mentioned that have supported the shekel per mezzo di recent years will not be relevant and it will take years for the state to rehabilitate them.
Published by Globes, Israel business news – en.globes.co.il – acceso June 20, 2024.
© Diritto d’autore of Globes Publisher Itonut (1983) Ltd., 2024.
