The dollar is at a record high of 13 years.
Why does this happen and how does it affect us?
The instability in global markets is flying the dollar upwards.
How does this happen, and most importantly - what are the effects on the Israeli economy and on the expense of each of us?
We went out to check
Walla!
Of money
09/05/2022
Monday, 09 May 2022, 11:03 Updated: 11:45
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After years of consistent decline, the dollar is soaring to an exchange rate against the shekel, which we have not known since 2009.
First, an increase in the dollar exchange rate (or the weakening of the shekel, which is supposed to remain strong in the long run) affects all foreign currency. For example, the euro strengthened against the shekel.
The immediate effect, of course, is on foreign exchange transactions.
In the case of manufacturers: an increase in the prices of raw materials imported to Israel for production, but also an improved return for the goods they export from Israel, ie - the final profit from sales abroad, received in foreign currency, will be higher than the slight increase in production and transportation costs.
It should be noted that in 2021, for the first time, exports of services (mainly to high-tech) were transferred to exports of goods and products.
In other words - an Israeli high-tech company that develops its product in Israel, pays salaries in shekels but makes dollars, is expected to enjoy improved profits (of course as long as it is only the exchange rate, since high-tech companies are exposed to declines in NASDAQ as described below).
Who loses? Whether it is raw materials (some of which have become very expensive due to high transportation costs as a result of fuel prices and as a result of the removal of a large Russian manufacturer, especially in terms of energy, from the market - following the sanctions imposed on it) or finished
products
. The dollar is expected to increase the price of imported products
.
As you may recall, a few months ago when the public discourse was about the cost of living, many importers claimed that they did not discount their products despite the strong shekel because it helped them absorb the rise in the prices of goods and transportation.
It now remains to be seen whether even when the exchange rate changes to their detriment, they will wait with the price update ...
In other words: inflation is not enough - that at least until the end of 2022 should remain high and not enough increases due to the corona crisis, transportation costs and war in Ukraine For rising prices.
.
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Anything we pay in dollars will cost more in shekels.
For example, vacations abroad, but also quite a few imported products (Photo: ShutterStock, PR)
America is becoming more expensive for us
Of course rain in the private market there are products that we usually pay for in foreign currency, especially in dollars.
For example, the shekel in our pocket will buy us less dollars when we want to buy plane tickets, shop at international sales sites or pay in cash for expenses when traveling abroad.
Experts estimate that the shekel will continue to be a strong currency in the long run The recent uncertainty in the capital market
Matan Sheetrit, economist at Psagot Investment House.
The decline in the markets forces institutional investors to buy foreign currency (Photo: Rami Zranger)
why is it happening?
To better understand the reasons for the strengthening of the dollar, we turned to experts:
Matan Sheetrit, an economist at Psagot Beit Investment House
: Of about 10% against the dollar, when as of this writing the exchange rate is about 3.42 shekels to
the dollar.
Sharpness over the past month.
Declines in markets are forcing institutional entities to purchase foreign exchange to maintain the required rate of exposure to forex
. Another explanation is that in a period of declining markets the dollar is used as a "safe haven" and everyone is running to purchase it.
It is important to emphasize that basic factors such as current account surpluses and real investments in the Israeli economy continue to support the strong shekel in the long run, but as long as nervousness in the markets continues, the depreciation of the shekel is expected to continue (or at least remain stable at current levels).
In our view, the weakness in the
Nasdaq
index is expected to lead to a weakness in exports of high-tech services later this year
, so the current account surplus may support the strengthening of the shekel in the future.
Finally, we will
mention "(If it is from food, housing and energy prices). A 1.0% depreciation in the shekel (against the dollar) is expected to lead to an average increase of 0.15 NIS in the annual inflation rate."
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