After the drama that unfolded yesterday over the election of Knesset representatives to the Judicial Selection Committee, trading in the foreign exchange market is currently characterized by relative quiet, with a slight but steady strengthening of the shekel. "It seems that market players want to believe that there are auto agreements, so the dollar is struggling to rise," said one trader in the foreign exchange market.
On Wednesday of this week, the dollar jumped by 2.5 percent against the shekel to 3.64 after news of a delay in voting for the Judicial Selection Committee. In the evening, after it became known that MK Karin Elharrar, an opposition representative, had been elected to the committee, the shekel strengthened again and the dollar made its way back to NIS 3.57.
Trading in dollars. Became an arena for speculative currency players, Photo: GettyImages
Yesterday and today (Friday), the shekel continues to maintain its strength, and is currently trading around NIS 3.55, a strengthening of 0.2 percent since the morning.
Speculators dominate the Forex market
"Trading in the domestic foreign exchange market proved this week the extent to which shekel trading has become disconnected from economic factors and has become an arena for speculative currency players. Most of the increase in the past two months, and of course the decline until yesterday, stemmed from the activity of institutional investors and speculators. Both gambled on the depreciation of the shekel, with the tailwind, of course, being the shocks in the economy if the reform's supporters win," Yossi Frank, CEO of Energy Finance for Risk Management, told Israel Hayom.
Frank, like other players in the foreign exchange market, did not share the assessments regarding the Bank of Israel's intervention in foreign exchange trading in recent days. "It is much more likely that the big sellers were institutional investors and automated models that were caught in declines and intensified the trend, than it was the Bank of Israel that sold. My opinion as a professional is that it was his duty to intervene for many and varied reasons, but as stated, it is very likely that the bank did not intervene in trade."
Bank of Israel Governor Prof. Amir Yaron. Mark the dollar-shekel equilibrium point, photo: Oren Ben Hakon
Frank adds: "The Governor of the Bank of Israel, in an unusual and very unusual statement, marked the equilibrium point of the dollar-shekel without reform - 3.40. So if the reform dissolves, it is likely that the shekel will strengthen, a strengthening that will gain momentum if the government falls apart."
The dollar where to?
"Experience shows that foreign exchange rates have a tendency to converge into equilibrium zones as long as nothing dramatic has happened in the country (see Turkey and Argentina). As long as there is no drama, any deviation from equilibrium will end up returning to the natural environment," Frank explains.
"In the short term, nervousness will prevail, and there may be additional phenomena like this week, subject to political developments. Since I believe that the reform will not pass and the government in its current form will not last, then a return to 3.40 in the medium term seems a very likely scenario," he estimates.
On the other hand, Yossi Freiman, CEO of Frico Risk Management, Finance and Investments, believes that the dollar will remain in the 3.60 area in the coming months. "Our assessment is that the Bank of Israel will make efforts to keep the dollar exchange rate low in the next three months, so that it will not rise above NIS 3.62 levels."
Freiman adds: "The domestic foreign exchange market is trying to recover from the sharp fluctuations recorded on Wednesday. The decision not to raise the interest rate in the US, together with the stabilization of the dollar below the NIS 3.6 level, raise the bar of expectations that the Bank of Israel may prefer to act similarly to the US Bank, with the expectation that the shekel's appreciation will lead to a halt in the increase in inflation."
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