After last week’s storm, the dollar and the euro continue to weaken against the shekel and their representative exchange rate was set today (Sunday) at NIS 3,089 and NIS 3,484, respectively. Today at 16:00, the Bank of Israel’s latest interest rate decision for 2021 will be published.
Initially, the Bank of Israel refrained from purchasing dollars following the harsh criticism of the State Comptroller, Matanyahu Engelman, over the bank’s acquisition policy, but last week it again intervened in trade. This is after the exchange rates of the dollar, the euro and the pound sterling have fallen in the last two weeks to lows of decades, a situation that makes it difficult for Israeli exports.
Last week, the Governor of the Bank of Israel, Prof. Amir Yaron, said in response to the concerns currently being heard in the economy about an increase in inflation, that the Bank “estimates that inflation in the coming months will be near the upper limit of the target (up to 3%).” “And return to the target center environment (2%) after weakening supply chain disruptions that currently limit supply.”
The governor noted that “we see some encouraging evidence of easing some of the difficulties in global supply chains, and over time this process is expected to support declining commodity and transportation prices. We are also looking at the world in terms of inflation developments.” -OECD “. According to him, “the Bank’s Research Division expects that by the end of the third quarter of 2022, the Bank of Israel’s interest rate will be 0.1% or 0.25%.”
Who benefits from the collapse of the dollar, and is it time to buy foreign currency?
Why do foreign exchange rates fall?
The foreign exchange market in Israel has recently received billions of dollars from various directions, from those entering the market from natural gas productions sold abroad, through the large funds that high-tech companies bring to Israel, which are forced to convert dollars into shekels to pay salaries, electricity, water and property taxes. “Foreign investors in the country. On the other hand, the relatively small departure, especially in October after the holidays, of Israelis abroad, who do not purchase foreign currency in large quantities as in the past, further reduced demand. All of this celebration is also attended by shrewd speculators who “make a turn” from the swing in the exchange rates of the currencies in Israel and make easy money from the fluctuations of the dollar and the euro.
To whom could this be problematic?
The decline in the exchange rates of foreign currencies greatly hurts Israeli manufacturers and exporters, whose entire expenditures in Israel are made in shekels. They pay wages in shekels and all the bills and expenses, but now receive only 310 shekels for every 100 dollars, compared to 340 last year. The same is true of those who export to Europe and receive only NIS 360 per 100 euros, compared to about NIS 400 last year.
Who benefits from the situation?
The fall in the value of foreign currencies reduces the expenses of Israelis who go abroad. Flight tickets, hotel rooms or rental cars abroad are becoming more lucrative and cheaper. This is a profit of hundreds and also a thousand shekels and more for a family that will spend a week abroad. Beyond that – we are on sale month: Bachelors Day, Black Friday and Cyber Monday. Following the collapse of the dollar and the euro and shopping abroad The Israelis.
Is it time to buy Euros and Dollars?
The shekel is a strong currency because Israel’s economy is showing strength and has recovered well after the corona crisis. But in an economic forecast there is always a gamble. A fifth wave of corona could come, or God forbid a security deterioration, which could hurt the Israeli economy. Any such event can suddenly shake the currency market and affect the dollar and the shekel. In any case, no one guarantees that the exchange rates of the dollar and the euro have already reached the floor.
What is expected now?
Experts in banks and investment houses have long stated that it is impossible to artificially influence foreign exchange rates. If the dollar weakens in the world, no step by the Bank of Israel will be able to strengthen it in little Israel. The Bank of Israel will find it difficult to continue its dollar purchases over time and regularly. Therefore, forecasts heard in recent days from currency experts say that it will not be long before the dollar in Israel is worth less than three shekels, and that the low point of the euro is still ahead of us and will also break.
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