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Shekel Weaker, Dollar Stronger, But Who’s Winning?

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The dollar has risen dramatically against the shekel, with the latter currency declining 6.8% against the dollar since July. This was not necessarily considered a bad thing earlier in the year, when the Bank of Israel was buying up dollars to prevent inflation resulting from radical growth and the Israeli natural gas boom. However, now the decline of the shekel compared to the dollar is a worrying development for Israelis.

Some economic experts believe it is more of an issue with the perception of America’s strength compared to the rest of the world, given geopolitical tensions, a slowdown in Europe and weakness in China. Some feel that Israel is suffering from collateral damage from that, although it cannot be denied that the recent conflict with Gaza took its toll, along with the disturbing decline in overseas investment in Israel.

Meitav Dash, Chief Economist Alex Zabezhinsky said, “This year, the rate at which investment are leaving Israel is substantially higher than in  previous years.” He foresees a trade deficit problem that doesn’t look likely to turn around in the near future.

However, a stronger dollar and a weaker shekel can help some Israeli companies, like Checkpoint, which does many of its transactions in foreign currency. Robert Carmelli of Migdal Capital Markets, however, sees the rate reaching 3.7-3.8 to the dollar by the end of the year. “Whichever way you look at it, from our point of view, the situation is bad.” In addition, rising deficits and possibly higher taxes give more cause for concern.

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