Citigroup Global Markets analyst David Lubin says that in the medium term, shekel appreciation is "inevitable".
Lubin says that interest rate expectations have risen, as the market adjusts to higher than expected GDP growth. The Bank of Israel, he says, will continue to face a dilemma as it looks to restrain inflation with higher interest rates, but concurrently wants to limit export-hurting currency appreciation.
In the near term, the analyst sees the shekel-dollar exchange rate staying relatively stable. In the medium term, Lubin says the shekel will appreciate due to the balance of payments remains strong, the emergence of a positive net international investment position, and the possibility of Israel becoming a natural gas exporter.
Lubin sees interest rates reaching 3.5% next year.
Published by Globes [online], Israel business news - www.globes-online.com - on September 27, 2010
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