The shekel continues to strengthen against the dollar and this afternoon the Bank of Israel set the representative rate at NIS 3.289/$, down 0.454% from yesterday, and the sixth straight session in which the shekel has gained against the US currency. In early evening futures trading the shekel strengthened a further 0.17% to NIS 3.284/$. The shekel is at its strongest against the dollar since July 2008.
The hedging policies overseas of Israeli institutional investors has played a major role in the strengthening of the Israeli currency. Shmuel Berger of Berger Finance Research said, "This is the equation - markets rise and the dollar falls. In the short term this trend will continue with the markets continuing to rise and the dollar continuing to fall. I don't rule out an exchange rate of NIS $3.00/$ and NIS 3.80/€.
He added, "On the day that it becomes clear that the vaccinations have eliminated the virus as a fact, the markets will fall and the required correction will happen and then we will see the dollar-shekel rate back up to NIS 3.50/$ and perhaps even more."
So why has the stock market completely ignored the virus and its economic fallout?
Berger said, "The capital markets see the virus as a passing episode that has increased the use of technology, online and generally. For the markets, the range of a year until the end of Covid-19 even represents an incentive to move higher."
The second reason for the high markets is the low interest rate. "Institutional bodies around the world have no alternative to investing large amounts and the money continues to flow every month and is new fuel for buying shares, bonds, and every other investment in the capital markets in various financial instruments."
The third reason according to Berger is due to the world's central banks, which has signaled their unlimited support. "The central banks and governments are broadcasting in every possible way to the world that investors are not walking alone and injecting money into the banks, to businesses and even directly into the pockets of the public," he said.
Published by Globes, Israel business news - en.globes.co.il - on December 2, 2020
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