Despite Fischer's suggestion, businesses hooked on dollars

On Tuesday, the dollar appreciated by 0.45% to NIS 4.06, after days of retreat.

stanley fischer 88 (photo credit: )
stanley fischer 88
(photo credit: )
Shraga Brosh, president of the Manufacturers Association, on Tuesday rebuffed calls by Bank of Israel Governor Stanley Fischer to stop using dollar-linked prices as a benchmark in making deals and transactions. "I am glad that we are all switching from dollars to shekels, but there is a problem convincing the customer abroad to send me shekels," Brosh said at the "Hope Conference," which was organized by the New Histadrut Labor Federation. "Foreign customers are paying us in dollars and with the conversion into shekels we are getting 10 percent less, which is cutting our profits." Speaking at the conference, Fischer again suggested that it was time to stop fixing prices in dollars. "I hope that those people who have lost money because of the drop of the dollar, will be persuaded that it would be better to switch and use shekels," he said. On Tuesday, the dollar appreciated by 0.45% to NIS 4.06, after days of retreat. Since the beginning of the year, exporters have lost some NIS 700 million as a result of the strengthening of the shekel to the dollar, according to estimates by the Manufacturers. Economists at the Association added that in nominal terms over the past year the shekel strengthened by 10% against the dollar, and that given the heavy weight of the dollar in Israeli export transactions (about 75%) the effect of the weakening greenback on growth rates was critical. Social Welfare Minister Isaac Herzog, also speaking at the conference, said the plunge of the dollar was costing hospitals, universities and local social institutions millions of shekels from dollar-linked donations. Separately, Elisha Yanai, chairman of the Israel Association of Electronics and Information and general manager of Motorola Israel warned Fischer about the "serious harm to the Israeli hi-tech industry," caused by the drop in the shekel-dollar exchange rate. In a letter sent to Fischer, Yanai called for the immediate establishment of a national council, that would offer appropriate solutions to enable the local hi-tech industry to grow under in a weak dollar environment. "If we leave the market unfettered, we are bound to see the dollar dropping to NIS 3.5 against the shekel by this coming summer," said Yanai in the letter. "Since the beginning of April 2006, the US currency has weakened by 13% against the shekel eroding 10% of our profits." Yanai added that what was even more worrying was the fact that the weak dollar was raising the cost of manpower in the Israeli hi-tech industry making it less attractive in particular for international companies to keep their development and manufacturing centers here. "The majority of hi-tech companies calculate their budgets in dollars and pay salaries in Israel in shekels," said Yanai. "Thus with shekel-linked salaries remaining stable, the weakening dollar has created a situation of a relative increase in salary costs, in dollar terms, in particular for international companies. This situation is poised to have harsh consequences for the future of the hi-tech industry in Israel."