Citi: Shekel overpriced by 10%

Shekels Photo: Shutterstock

Citi calculates that the Israeli currency is 10% above its fair value.

The shekel is the most expensive of currencies in emerging markets, Citi has found. Citi analysts found that currencies in leading emerging markets such as India, Russia and Hungary were greatly underpriced while currencies in South Korea, Taiwan and Singapore were relatively expensive. However, Israel was by far the most expensive of them all at an estimated 10% higher than its fair value in terms of the value of purchasing power parity (PPP) and the exchange rate.

Citi also found that the shekel had strengthened significantly against the currencies of countries with comparable economic performance to Israel such as Singapore, South Korea and the Czech Republic. Over the past five years, Citi found that the shekel had strengthened 20% against the Singapore dollar, and 15% against the new Taiwan dollar.

Citi explains the shekel's strength in terms economic data including the large surplus in the balance of payments of 3.5%. However, Taiwan has a 13% surplus and South Korea has a 7% surplus (2017 forecast). In the past three months the shekel has strengthened against the dollar from NIS 3.62/$ to NIS 3.48/$, while the Bank of Israel has reduced its foreign currency purchases to a minimum. Israel's foreign exchange reserves stand at a record $112 billion.

Published by Globes [online], Israel business news - www.globes-online.com - on December 25, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Shekels Photo: Shutterstock
Shekels Photo: Shutterstock
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