The foreign currency market is reacting to speculation regarding Israel’s credit rating and the expected approval at today’s cabinet meeting of the government’s emergency economic plan.
There is no direct foreign currency trade today, although within the framework of dollar options trade on the Tel Aviv Stock Exchange, the Israeli currency is weakening to NIS 4.94/$. Turnover is moderate, at NIS 6,500 units. The rate at which the shekel stands in options trading reflects a 1.3% depreciation from Friday’s rate of NIS 4.876/$.
At web-posting, the cabinet is debating the proposed emergency economic plan formulated by Prime Minister Ariel Sharon and Finance Minister Silvan Shalom. The program, which includes new taxes on shekel savings and deposits and on capital gains from the stock market, reduces yields from these sources and makes the dollar a relatively more attractive investment. There is also concern that the program will effectively increase the tax burden, which will deepen the harsh recession in which the Israeli economy finds itself.
Concerns about the Israeli economy have heightened since Standard and Poor's revised its outlook on the State of Israel to negative from stable two weeks ago. Last week, Goldman Sachs said it expected a downgrade in Israel’s credit rating to BBB+ from A- within the next three months and advised investors to underweight the local stock market.
Economists from local brokerage Gift said in their latest weekly survey that the target of the Israeli foreign currency market was for a shekel-dollar rate of NIS 4.975/$. The economists recommended that investors take advantage of any shekel strength to buy dollars.
Published by Globes [online] - www.globes.co.il - on 28 April, 2002