The shekel appreciation is about to end, and the shekel will probably weaken in the medium and long term, the banks believe.
Union Bank of Israel believes the shekel/dollar exchange rate will range between NIS 4.35-4.46/$ this week. The bank states that the deviation in the budget deficit, the security situation, and declining economic activity by all sectors, support a shekel depreciation.
Union Bank believes that the recent rise in the capital market could moderate if there are new terrorist attacks.
Union Bank revised its inflation predictions to minus 0.3% in June and zero in July. The bank predicts 1.1% inflation in the next 12 months, and 1% in 2003.
Bank Leumi also believes the shekel appreciation is about to end, although the high interest rate gap between the shekel and dollar will prevent any substantial depreciation. Bank Leumi therefore predicts the shekel/dollar exchange rate will stay at its current level, with fluctuations depending on diplomatic and security developments.
Bank Leumi believes the capital market will be volatile, “since the tail wind that drove stocks is over”, and share prices will correct their recently surge, regardless of the companies’ real values.
Bank Hapoalim agrees that the low shekel/dollar exchange rate could be disproportionately affected by unexpected domestic or external developments, although the current optimism and high interest rate gap could support a further shekel appreciation in the short term. The bank predicts the shekel/dollar exchange rate will reach NIS 4.71/$ in 12 months.
Investment house Gift of the Ilanot Batucha group, believes it is too soon to tell if the shekel appreciation is over. Gift believes this week’s summit meeting in Aqaba between US President George W. Bush, Prime Minister Ariel Sharon, Palestinian Authority Prime Minister Mahmoud Abbas (Abu Mazen), and Jordanian King Abdullah II could increase optimism. Gift predicts foreign currency trading will be volatile this week.
Published by Globes [online] - www.globes.co.il - on June 1, 2003