Israeli exporters were besides themselves Monday, as the dollar sank below the NIS 3.60 level. The lower the value of the dollar, the more expensive Israeli exports become in dollar terms, and the less competitive Israeli products are on foreign markets. The dollar closed 0.3% lower Monday, at NIS 3.592.
The dollar has been rallying of late on international markets, so, analysts said, the recent depreciation of the greenback in Israel is a result of the strength of the shekel. The two main reasons for this, the analysts said, was due to the expected influx of foreign currency in the wake of upcoming sales of gas from Israel's offshore fields, and Israel's relatively higher interest rates. An additional reason for the shekel's popularity, they said, was a series of pro-business statements made recently by Finance Minister Yair Lapid.
One traditional way to correct the value of the dollar has been to cut interest rates, causing investors to sell shekels and lower their value relative to the dollar. However, that tends to cause inflation, and the Bank of Israel has been reluctant to cut rates too much. Analysts said that BOI chief Stanley Fischer realizes that the problem of dollar weakness in general, despite recent rallies, is a worldwide one, and that it doesn't pay to try and fight the world markets.
The analysts said that Fischer would tolerate a further appreciation of the shekel, to the area of NIS 3.5. Meanwhile, exporters were appealing to the BOI for relief, saying that they were having a hard time as it is competing for market share, and that a further increase in the shekel's value would be “devastating.”