The shekel is strengthening in late morning inter-bank trading against the dollar and against the euro. The shekel-dollar exchange rate is down 0.33% at NIS 3.762/$ compared with yesterday's representative rate, and the shekel-euro rate is down 0.11% at NIS 4.245/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.266% from Thursday's rate at NIS 3.744/$, and the representative shekel-euro rate was set down 0.298% at NIS 4.249/€.
Citi analyst David Lubin said, "In my opinion the Bank of Israel is too relaxed on the negative consequences of deflation. They are claiming all the time that the shekel is too strong and in my opinion they must intervene in a much more aggressive way or lower interest rate to negative levels, or do both simultaneously. What they are currently doing is really not sufficient."
He added, "Maybe they believe that deflation will disappear by itself. There are those who think that there are global forces at work and there is little that the Bank of Israel can do to influence it. Another viewpoint is that this is good deflation because of the continued opening up of market forces, liberalization and government efforts to lower the cost of living."
"But we must remember that the shekel is very strong relatively and this influences importation of products. If the Bank of Israel takes the inflation target seriously in must intervene on the foreign currency exchange market much more aggressively. Governor Karnit Flug will probably continue to believe that she doesn't have to provide support for export companies because that's not her job and they must adapt themselves. And that is a view that is correct."
Published by Globes [online], Israel business news - www.globes-online.com - on April 26, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016