export biz 88 298.
(photo credit: Ariel Jerozolimski)
The continued weakening of the shekel-dollar exchange rate has cost Israeli exporters $700 million since the beginning of the year, the Manufacturers Association of Israel said Tuesday, with the move especially having an impact on exporters.
"The weakness of the dollar is negatively affecting exporters in their competitive ability and is bound to hurt their profitability," said Richard Gussow, senior analyst at Excellence Nessuah.
The shekel snapped a four-day win streak against the dollar on Tuesday, slipping to 4.1240 from 4.1235 on Monday but remains around its best levels in six years.
"In the long-run, the hardest hit are those export companies, which are based purely in Israel, while the affect on export companies such as Makhteshim Agam and Israel Chemicals will be less critical as they have operations overseas and are increasing their sales to Europe on the back of a stronger euro," noted Gussow. "In addition, they are profiting from the strength of the shekel as much of their cost base is in Israel."
With the shekel continuing to strengthen and the dollar weakening, president of the Manufacturers Association, Shraga Brosh, on Tuesday urged Bank of Israel Governor Stanley Fischer to make a 0.5 percentage-point cut in the base lending rate for May, in an effort to reverse the trend of the gaining shekel and secure the competitive power of the exporters.
Since Fischer left interest rates unchanged at the end of last month after a round of rate cuts since October, the shekel has gained 1.7% against the greenback.
"If the shekel-dollar exchange rate remains at its current low level, the industry could be expected to lose $2.4 billion in sales in the year of 2007," said Brosh.
Economists at the Association pointed out that over the past year, the shekel has gained 10% in nominal terms against the dollar, a situation that Brosh said was already hurting exporters' profitability as the damage to their competitive ability was affecting future export deals, in particular in the traditional industries.
Brosh warned, however, that the continued strengthening of the shekel against the dollar also would impact sales to the domestic market.
"The local market and in particular the traditional industry will be hit hard as they have difficulty in guarding their competitive power against import competitors as imported goods have become cheaper given the strong shekel," said Brosh.