Shekel gains continue

Shekel Photo: ASAP Creative

Leumi: The shekel-dollar rate will trade between NIS 3.30-3.40/$ next year and could end 2021 below NIS 3.30/$.

The shekel continues to strengthen against the dollar to levels not seen since July 2008. In early afternoon inter-bank trading the shekel was down 0.46% against the dollar at NIS 3.326/$ and down 0.22% against the euro art NIS 3.957/€.

Bank Leumi (TASE: LUMI) FX and derivatives strategist Kobby Levi said, "The strengthening of the shekel against the dollar in the past few days has taken place due to positive news in Israel and abroad."

"Worldwide the financial markets are calculating a new path with a growing atmosphere of optimism as encouraging news continues to be published. For example we have been told in recent days that AstraZeneca is on the way to producing and distributing its vaccination and that the former Chair of the US Federal Reserve Janet Yellin will be appointed by Joe Biden as Secretary of State to the Treasury and data from the US Purchasing Management Index (PMI) was stronger than expected. All this supports a positive atmosphere in global financial markets and also influences the foreign exchange market with safe haven currencies like the US dollar, Japanese yen and Swiss franc continuing to weaken, while in contrast currencies in emerging markets with a relatively stable profile have strengthened including the Mexican peso, South African rand and Brazilian real."

Speaking about the domestic market, Levy says there has also been positive news in Israel. The low level of Covid-19 infection is being maintained and the economy is gradually opening up. The International Monetary Fund (IMF) published an overall positive report about the Israeli economy and Israel's credit rating was left unchanged. This environment generally encourages the weakness of safe haven currencies, first and foremost the dollar, and among others the shekel. However, this time the shekel is being consistently traded at peak value against the dollar and against the basket of major currencies, with on the one hand the positive news and the rise in share prices supporting this, while on the other hand, a significant level of technical support has been created around the NIS 3.34/$ level, which is meanwhile attracting buyers and deterring sellers.

Levi said, "In the short term, in the absence of any bad news, and towards the end of the year, the technical support level of NIS 3.34/$ might be broken, and the shekel will strengthen beyond it. However, it is possible that uncertainty will return and bring with it short-term events that will bring about the weakening of the shekel. In the long term the foces are continuing that will will support the strengthening of the shekel and first and foremost the expected gradual rise in the current account surplus. Israel is expected to increase its exports in the coming years, mainly through the activities of the high-tech sector.

He added, "an additional force supporting the strengthening of the shekel is financial activities with 23020 expected to end with an exceptional surplus in foreign investments in Israel, mainly through Israel joining the WGBI and the completion of sales of high-tech companies on deals that were signed in the past."

Leumi believes that the shekel-dollar rate will trade in the NIS 3.30-3.40 range until the end of 2012, with a gradual strengthening against the dollar, so that it's possible that the rate could end 2021 below NIS 3.30/$.

Published by Globes, Israel business news - en.globes.co.il - on November 25, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
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