The table does not lie: Where is the shekel relative to the world's currencies?

The representative currencies of the countries indicate the state of their economies and allow a comparison between their economic forces.

What happened to the world's currencies and economies in 2021?

What awaits them in 2022?

And where is the shekel compared to the currencies in the world?

Roast Greenberg

29/12/2021

Wednesday, 29 December 2021, 17:32 Updated: Thursday, 30 December 2021, 11:13

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Consumers around the world are uniting around the fear of rising prices and lamenting the arrival of inflation, which lowers the value of our money and burdens our pockets. The monetary policy of central banks is necessary for currency stabilization, but sometimes even that is not enough.

"Most major currencies in the world experienced negative returns in 2021," said John Mayer, senior investment manager at US ETF Global X as a result of continued economic uncertainty over the ongoing global corona plague.

This has led to rising inflation and problems along the global supply chain. , Which were two of the dominant issues in 2021, and were likely to be a major factor in the lower returns.

After all, a currency tends to reflect the strength of the economy through which it is backed, and as can be seen in the table (of central banks), most countries experienced higher levels of inflation as economies began to reopen, and consumer spending showed demand.

For example, with the exception of 5 economies, all other central economies have interest rates below 1%, as set by their central banks.

"Many central banks and policymakers have seen inflation as temporary and still do not see the need to raise interest rates, but that is likely to change in 2022, given the direction of the US Federal Reserve, along with other central banks, for tighter policies."

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Source of data: American ETF Global Global;

The data are correct as of December 27, 2021 and were collected from Bloomberg (Photo: GLOBAL X)

So which of the citizens of the powerful economies could buy more with the currency of their country and to whom was the money worth less?

"Taiwan, Mexico and the United States led 2021 with the highest yield (against the dollar. CG)" adds Mayer (see Table of 3 Strongest Currencies).

The US dollar is considered a safe haven and a global reserve currency, and in an environment where risk is being minimized, there is a tendency among investors to switch to dollars.

Corona variants (Delta and Omicron) have continued the momentum of the dollar upwards

.

Kobi Levy, Head of Leumi Capital Markets Strategies Desk (Photo: Kfir Sivan)

Kobi Levy, head of the market strategy desk at Leumi Capital Markets

, explains that "Taiwan and China are two countries that have close ties, and although they did not interpret the Chinese currency optimally, due to its value being determined by a major body in the country, its return to activity also helped Taiwan. It is

important to note that the activity in this sector is at a boiling point that is very important and significant for the global production of a variety of products, and the current shortage of chips supports economic activity in Taiwan. In technology and growth with its help. "

Data source: US ETF Global X;

The data are valid as of December 27, 2021 and were collected from Bloomberg (Photo: Walla !, GLOBAL X)

Meanwhile, in Asia

Meyer, however, cools the opportunities inherent in the Taiwanese economy, and therefore in its currency performance, adding that “despite astonishing performance in 2021, the Taiwanese dollar may face rising winds of foreign cash flow and geopolitical risks, as foreigners sold $ 2.3 billion in domestic stock. last October, compared with $ 440 million a month earlier. In addition, the island faced with unprecedented challenges as China's president declared once again that achieve reunification with Taiwan.

In contrast to the US dollar and Taiwan, the currencies of Japan, Sweden and South Korea recorded yields the most negative.

Monetary The South Korean has been affected by the country's economy's confrontation with uncertainty over supply chain disruptions, an increase in the number of those infected in the corona, and unforeseen presidential elections to be held in March 2022.

Another major issue in South Korea's economy is inflation, which has soared at its fastest rate in almost 10 years, with the consumer price index rising to 3.7% yuan, while expectations were at 3.1% compared to the Central Bank of Korea's target of 2%.

As for the Swedish krona, then it was actually one of the best performing currencies in 2020, but since then the currency has gone out of control and failed to obtain most major currencies until its examination on December 27, 2021.

This is because Sweden's economy is driven mainly by exports, and hit chain problems World supply. In addition, Sweden has experienced the largest rise in inflation in the last 28 years, and the Riksbank (Swedish central bank) considers it temporary, and is not expected to raise interest rates following its rapid acceleration.

And while the Japanese currency has historically been perceived as a safe haven in times of increased risk, in the past year it has actually weakened mainly as a result of Japan's slow recovery from the corona.

Most developed markets saw an economic recovery in 2021 along with rising consumer prices as a result of rising demand, while Japan stood still.

John Mayer, Senior Investment Manager at US X Global ETF (Photo: GLOBAL X)

Israel against the rest of the world

But 2022 may remove the cloud of economic her, especially in light of the opening of the economy which, in addition to the last elections inauspicious state, in light of the departure political impasse that would allow it to pass a budget Fiscal stimulate growth. "

Alongside the strongest currencies, can be Frobntzialiim and divert the attention of the Israeli Shekel, Which came third in its performance against the rest of the world. Examining the shekel against other currencies shows that the Israeli economy coped with the corona better than the United States and Europe.

In 2020, there was hope that Europe would emerge stronger from the corona, "says Levy," in light of joint debt issuance plans, and in contrast to the previous situation in which each country was responsible for raising its own debt.

This program defined the expectations for fiscal uniformity and the reduction of gaps vis-à-vis European countries, and created a snapshot at the beginning of the epidemic of Europe's positive response to the fiscal policy in the face of morbidity.

In Germany for example, instead of giving subsidies to employees, giving them to companies to retain the employees in the company, this led to lower unemployment, alongside the ability to re-energize the economy more quickly.

Or so they thought.

In practice, towards the end of 2020, several things happened that somewhat tarnished the picture, including the European Central Bank's expression of dissatisfaction with the sharp strengthening of the euro, which weighed heavily on the economy due to being a net exporter.

However, there are speculators of the strengthening of the euro due to the interest rate already being reflected in the local exchange rate, alongside the expectation that Europe will experience some recovery, also in the corona issue, and move to focus on more basic economic tracks like current account surplus.

World currencies against the shekel (Photo: courtesy of Bank Leumi)

Strengthen in strangers

Against the euro and the dollar, "the Israeli currency was one of the strongest currencies in the past two years," specifies Levi "This is mainly due to real activity in Israel, characterized by a current account surplus. Israel is a net exporter, and the biggest exporters of its reach in the services sector with a particularly high-tech.

On the other hand Israel imports Commodities but on a lower scale so in the end there is a lot of money left that requires conversion from foreign currency to shekels to pay salaries, overheads, etc. In addition, in the last two years, unprecedented amounts of money have entered the financial account from the field of securities investments.

Since foreign investors came to Israel and purchased bonds of the Israeli government throughout the year, Makamim, and participated in issues of Israeli companies abroad alongside the purchase of shares on the Israeli Stock Exchange. This is when foreign activity was almost completely neutral until 2020, but has received a boost in the last two years.

One of the significant reasons for this is the strength and quality of the Israeli capital market in the eyes of foreign investors, in a way that led to its addition to significant indices in the world, and hence to bringing investors and foreign funds, which flowed money into Israel very quickly.

Turkish President Erdogan.

Trying to save the economy (Photo: Reuters)

Erdogan lacks a penny per pound

But all this good there is also the opposite point, because the excess activity of these balances and appreciation, the Bank of Israel's policy is a foreign exchange market, the past two years have been very unusual in relation to the three years before.

The Bank of Israel bought up more than 55 billion dollars, and you could say that without These purchases The shekel would have strengthened much more

, hence the estimates for the new year are that the shekel will continue to be a strong currency, but less than we have experienced in the past two years.

The expectations are that the shekel will undergo a slight appreciation move, to a rate that will be in the average range of NIS 3-3.2 against the dollar. "

Compared to the currency of the land flowing milk and honey, that of our neighbor to the north and northwest - Turkey, is bleeding. Although the Turkish lira recorded a 44% jump about a week ago following President Erdogan's anti-dollarization program, the currency still remains at the bottom of the currency performance table and records the largest loss of value.

All this also in the shadow of the filing of criminal complaints by the Supervisor of Banks of the State Economists and journalists, including two former central bank governors, for violating the Banking Reputation Protection Act. So according to Bloomberg.

"Erdogan's policy of becoming sole ruler in recent years," Levy explains, "led him, among other things, to replace the central bank governor, and other officials, supporters and associates, who support his policy of avoiding interest rate hikes, claiming it harms the economy.

But Turkey is experiencing very high inflation, which according to accepted economic models requires relatively high interest rates.

Due in part to this, foreign investors are losing confidence in the Turkish economy, and the currency of the country connecting East and West has become weak in the world.

Turkey is indeed the factory of Europe, but it is accompanied by a deficit in the current account, as it is still more of an importer than a manufacturer, very different from China for example.

And this is a problem for the Central Bank of Turkey, which does not hold foreign exchange reserves appropriate to the size of the economy, so the latter is in a negative foreign exchange balance.

The problems that characterize the Turkish economy mainly concern the issue of government and decision-making processes and these are expected to continue.

"Estimates in the world, and ours in Leumi Capital Markets, are that there will be a gradual devaluation of the Turkish lira by the end of 2022, and as long as the administration continues in its mode of operation, the potential for devaluation will be significant and higher."

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