shekel versus dollar 521.
(photo credit: REUTERS)
The shekel strengthened against the dollar but weakened against the euro in
morning interbank trading Monday.
After the shekel-dollar exchange rate
fell 2.5 percent last week to a one-month low, the exchange rate fell a further
0.54% in morning trading to NIS 3.369 – the lowest rate since the exchange rate
reached NIS 3.344 on July 16, 2008.
The shekel fell 0.1% to 3.3720 by
The shekel weakened against the euro on reports of a new
bailout package for Greece. The shekel-euro exchange rate rose 0.52% to NIS
Excellence Nessuah chief economist Shlomo Maoz, in an interview
Monday with Globes, attacked the Bank of Israel for its last interest-rate hike.
He said the 0.25% rise to 3.25% was the reason for the appreciation of the
shekel, which would lead to severe damage to the economy.
“Since the Bank
of Israel’s mistaken decision to raise interest rates on May 23, the shekel has
appreciated by 2% against the effective currency basket of 28 currencies of
Israel’s trading partners,” he said. “As I have said before, this decision was
hasty and wrong, in light of the low interest rates in Western countries, the
crisis in Europe, the economic slowdown in the US, and the fear of a crisis in
“Other countries also have high inflation rates, as in Europe and
Britain, and despite that they have not raised interest rates there. Although
strong activity in the Israeli economy has led to inflation, this inflation is
mainly in housing.
Raising interest rates cannot by itself stem the rise
in the cost of housing, only administrative measures such as those proposed by
the Finance Ministry can.”
Globes: But Bank of Israel Governor Stanley
Fischer said recently that exports continue to grow and there is no substantial
damage? Maoz: “Raising the interest rate and deciding that the currency
appreciation is for the time being not affecting exports, which continue to
grow, is like the man who fed his horse three times a day at first, then twice a
week, and then once a week, until the horse died. There is damage to the
competitiveness of the economy, and appreciation of 2% over such a short period
will cause harm.”
Can Fischer afford not to raise interest rates, given
the real-estate bubble? “Housing prices are no longer rising in central Israel.
Interest rates have risen to 3.25%, and now we have to stop and take a breather.
The economic slowdown in the US does not allow a rate hike, at least until the
second quarter of 2012. Any further increase in interest rates will cause
further appreciation of the shekel.“ Where will the shekel-dollar rate get to at
this pace? “My forecast is for 3.28 shekels to the dollar this summer. In my
view, the Bank of Israel has realized its error and will not raise interest
rates next month. It will lick its wounds and return to intervention in the
foreign exchange market, although the effect of intervention is weakening because
the interest-rate differential between Israel and the US stands at 340 basis
points on Treasury bonds. Entire industries will be wiped out in Israel because
of this interest-rate differential. Any factory that leaves will not come
According to Bank of Jerusalem foreign- currency manager Eitan
Admoni: “It seems that the interest-rate hike two weeks ago, which continued the
trend of recent months, combined with the especially optimistic growth forecasts
published this week, have resulted in the shekel-dollar rate having few
alternatives but to weaken. The dollar is also suffering from difficulties and
weakness in international markets. We believe that the dollar will continue to
weaken this week and in the coming weeks, and we see no substantial correction
on the horizon, at least not on the economic side. We expect the shekel-dollar
exchange rate to be NIS 3.323-3.382 this week.”
Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>