The shekel recorded its strongest-ever level of 78.1 points against the Bank of Israel's currency basket today, although this is bad news for the country's exporters, including tech companies, who will find it harder to sell their more expensive good abroad. Over the past few weeks, as Israel comes out of lockdown, the shekel has reclaimed its status as one of the world's strongest currencies.
Prico Risk Management and Investments CEO Yossi Fraiman told "Globes," "The exchange rate is threatening growth of the Israeli economy. The currency's value is encouraging high-tech to look abroad. The Bank of Israel recently changed the currency basket and distinguished between export currencies and import currencies and changed the weight (in the basket) of each one of them. For example, the US dollar was 24% and has risen to 38%, so that the weight of the dollar, which has been falling against the shekel, has pushed the currency basket further down and the low rates of exchange are damaging export trading and mainly high-tech companies."
"The Bank of Israel has allowed the shekel-dollar exchange rate to slide to NIS 3.378/$ today and this has pulled the currency basket to a new low. The moment that the shekel-dollar exchange rate falls while the dollar is strengthening in the world that really is hurting us," said Fraiman.
Meitav Dash analysts said in their weekly review, "The shekel has reclaimed its status over the past month one of the world's strongest currencies, even though in recent months institutional investors have sharply increased their exposure to foreign assets. The shock that the institutions went through in March, when they were force to quickly raise securities against their shares contracts abroad, have not deterred them from increasing exposure through contracts after the crisis."
"This exposure grew between January and August by 18% (nearly $6 billion) with direct exposure rising 16% (about $20 billion). After the exposure of institutions to foreign currency as a hedge fell in the year prior to the crisis, it again reached a record level of 20% in recent months, despite the cheaper costs of hedging."
Published by Globes, Israel business news - en.globes.co.il - on October 19, 2020
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