Shekel hits nine-year high vs dollar

Trade minister calls for immediate measures to assist exporters.

shekel 88 (photo credit: )
shekel 88
(photo credit: )
As the shekel rose to its highest against the dollar in nine years on Wednesday, Industry, Trade and Labor Minister Eli Yishai urged the government to set up a joint inter-ministerial committee for the swift implementation of an assistance program for industrial companies. The shekel rose to a Bank of Israel fixing of 3.9230 from 3.9370 Tuesday, the highest since September 1998, gaining for a second day as the US currency slumped to a record low against the euro after National People's Congress Vice Chairman Cheng Siwei said China "will favor stronger currencies over weaker ones." Since January 2006, the shekel has appreciated more than 14% against the beleaguered dollar. "The shekel is strengthening on the back of the dollar because the Chinese said they will favor other currencies," said Effi Cohen, a bonds trader at Leader & Co. Ltd. "There is also a sentiment that the central bank will reduce interest rates because of the shekel's appreciation, making the Shahar [bond] more attractive." "The world's currency structure has changed; the dollar is losing its status as the world currency," said Xu Jian, a vice director from the People's Bank of China. The Manufacturers Association of Israel expects the fall of the US dollar to cost exporters $1.4 billion from lost orders this year, or about 4% of the total anticipated, and in turn halt the recruitment of 15,000 new employees to work in the industry. Bank of Israel Governor Stanley Fischer, however, last week, rejected claims that the strong shekel was hurting export growth. In response to the claimed damage to industry's exports as a result of the weakening of the US currency, Yishai urged the government to set up a team with representatives of the Industry, Trade and Labor Ministry and the Finance Ministry to finance the implementation of the recommendations put forward by the "Artzi Committee." The proposal is expected to be discussed at the cabinet meeting on Sunday. The Artzi committee presented a set of recommendations regarding measures tailored to assist, in particular, small- and medium-sized manufacturers who were suffering from the shekel-dollar exchange rate. The assistance program, which is budgeted to cost the government NIS 460 million, includes a NIS 200m. emergency fund to assist small- and medium-sized companies, advisory services on how to insure against currency risk, a non-governmental fund for currency hedging and doubling credit lines for exports to high-risk markets. Bloomberg contributed to this report