Following the sharp depreciation of the shekel in the past few months, Deutsche Bank has come out with a recommendation against buying the Israeli currency, which it says may look cheap, but is not attractive.
Deutsche Bank cites the inability of the various parties to each agreement on legislation introducing changes into Israel’s legal system, and the constitutional crisis brewing in Israel, as important factors in the shekel’s weakness, saying that financial markets do not view such situations favorably.
The bank also mentions the flow of money out of Israel from Israeli financial institutions, as well as the sharp decline in investment in Israeli technology companies.
The reluctance of the Bank of Israel to set in to support the shekel is a further factor mentioned by Deutsche Bank.
Deutsche Bank concludes that while the shekel may be undervalued on a long-term view, in the immediate and medium terms there are significant factors weighing on it.
Meanwhile, Citi reported last week that it had taken profits on its short positions on the shekel and the euro. Although the bank said that a compromise on the Israeli government’s judicial overhaul plans could set off a wave of shekel buying, it added that the trend of Israeli investment in S&P 500 related assets, generating demand for US dollars, would be likely to weaken the shekel further.
On Friday, the shekel-dollar rate was set 0.1% lower, at NIS 3.8440.
Published by Globes, Israel business news - en.globes.co.il - on September 10, 2023.
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