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The euro at a six-month low: "When the government changes, the shekel will strengthen dramatically" - voila! money

2023-12-07T12:26:44.178Z

Highlights: After the dollar weakened dramatically over several days, the euro follows suit and trades at less than NIS 4, a rate not seen in the past six months. Yossi Frank, CEO of Energy Finance for Risk Management, explains that the reason for the euro's decline is different from the one that led to the crash of the dollar. "A strong shekel over time could harm the Israeli economy, but we're not there yet," he says. "The strengthening of the shekel may be Israeli pride, but it could hurt us economically," he adds.


After the shekel strengthened against the dollar, it also strengthened against the euro, which reached NIS 3.68: "The market assesses that the war will not spill over into other arenas"


Euro banknotes. "Israelis' attention is focused on the dollar"/ShutterStock, Stanislav71

After the dollar weakened dramatically over several days, reaching NIS 3.68, the euro follows suit and trades at less than NIS 4, a rate not seen in the past six months. Yossi Frank, CEO of Energy Finance for Risk Management, explains that the reason for the euro's decline is different from the one that led to the crash of the dollar, even though they have a mutual influence.

"When analyzing the change in currency rates," Frank says, "you have to separate the local effects on them from the global influences. The euro, like the pound sterling or the Swiss franc, runs against a whole basket of currencies. When you sell a currency in Israel, it weakens against the shekel. Israelis' attention is focused on the dollar.

"Last week there were strong fluctuations in both the dollar and the euro, but the shekel stabilized at the same rate, which means that what happened in the world is what affected their exchange rate, not the war with us. Since the US Fed announced that it does not intend to raise interest rates anymore, the dollar has weakened worldwide."

The expectation that the euro, like the dollar, will strengthen again, reaching NIS 4?
"Here I return to the local level. We have to look at the military and political arena. The shekel strengthened because the market assessed that the war in Gaza would not spill over into other arenas, and it continues this assessment even now. When he decides that the legal reform, which weakened the shekel, has been buried, and when the government changes, the shekel will strengthen dramatically, and the dollar and euro will crash.

"In such a situation, there will be a dramatic appreciation of the shekel, to a level that the governor himself declared, something no governor has done before, that the dollar exchange rate should be only NIS 3.4-3.5."

Franc. "A strong shekel over time could harm the Israeli economy, but we're not there yet."

The strengthening of the shekel may be Israeli pride, but it could hurt us economically.
"The strengthening of the shekel reduces imports, should also reduce the cost of domestic produce, most of which is based on imported raw materials, and weaken exports. Since we are export-based, both in defense and in high-tech, a strong shekel can actually harm our economy, and therefore, every time it strengthens, exporters shout that they are being harmed.

"This is the place to mention that exporters have rate hedging mechanisms that protect them from the strengthening of the shekel. An exporter should not bet on the exchange rate. There is a good gate, take it and set a year or two ahead. So there's no doubt that a strong shekel over time could hurt the Israeli economy, but we're not there yet."

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Governor of the Bank of Israel. The bank sold just $338 million in November, compared with $8.2 billion in October/PR

Meanwhile, the Bank of Israel updated its activity in the field of foreign exchange sales in order to stabilize the shekel. At the beginning of the war, the Bank announced that it was spending $30 billion in order to strengthen and stabilize the shekel during this period. In October, it sold $8.2 billion from the bank's foreign exchange reserves, while in November it dropped to about $338 million.

  • More on the subject:
  • Euro
  • shekel
  • dollar
  • Shekel exchange rate
  • The Legal Revolution

Source: walla

All business articles on 2023-12-07

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