For the first time since 2009, the Bank of Israel has updated the calculations of weights of the major foreign currencies in the nominal effective exchange rate of the shekel. The euro, which was worth 32.6% in the old weight, has been reduced to 26.4%, while the US dollar, which had been worth 24.8% has been increased to 26.4%, alongside the euro.
China's yuan has been nearly doubled from 5.7% to 10.2% while the pound sterling has been increased from 5.2% to 6%. The Turkish lira has been increased from 3.9% to 4.6%. Other currencies including the Japanese yen and the Swiss franc have been slightly reduced from 27.8% to 26.4%.
The Bank of Israel explained that, "In addition to the changes in the breakdown of trade in goods, the revised index is also based on data on the geographic breakdown of trade in business services, which were not available at the time the weights in the existing index were calculated. The weight of these services has grown constantly, reaching about one-quarter of Israel’s foreign trade."
The Bank of Israel added, " The weights in the new index are calculated on the basis of the bilateral flow of trade of goods and services, while adjusting for third party competitionwhich is expressed in Israeli exports competing with manufacturers from a large number of countries in each market to which they are exported, and not just with domestic manufacturers in that country. The new index includes 33 countries and 26 currencies (the difference being the result of the fact that 8 European countries included in the index use the same currency - the euro), compared to the existing index that included 38 countries and 28 currencies.
Published by Globes [online], Israel business news - www.globes-online.com - on October 28, 2015
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