Written by Brian Schrauger, Hezi Sternlicht, Ilan Gattegno, Hili Yacobi-Handelsman, Zeev Klein and Israel Hayom Staff
In spite of global efforts to hinder Israel’s economy, especially via the Boycott-Sanctions-Divestment (BDS) campaign, guess what country has one of the strongest currencies in the world?
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This week the Israeli shekel cemented its position as one of the world’s strongest and most solid currencies, making gains agains the well-know top three: the dollar, euro, and pound.
The symbol for Israel’s currency is ₪ and is often accompanied by NIS, an acronym that means New Israeli Shekel, “new” because it replaced a hyper inflated “Old Shekel” in 1985.
The symbol, ₪, is a merge of the first two Hebrew letters for the words “New Shekel” in the Hebrew language.
While the shekel’s strength is a remarkable commentary on global investors’ confidence, it is mixed news for Israeli who receive income in other currencies. When those currencies drop against the shekel, income drops too.
Also, a strong shekel relative to other countries currencies also makes products that they sell in Israel more expensive for consumers.
In Israel, the marketplace rule of thumb is 4 shekels for 1 US dollar.
In fact, according to the Bank of Israel, March’s foreign currency trade began with the shekel trading at NIS 3.62 per dollar.
Its exchange rate against the euro was set at NIS 3.82, and relative to the pound, came in at NIS 4.47.
Wednesday’s dynamic trading day this week, along with the gains the shekel marked vis-a-vis all major currencies, especially the 0.74% drop in dollar rates, prompted the Bank of Israel to intervene and purchase foreign currency valued at $300 million in an attempt to curb the trend.
The shekel has appreciated by 6% against the dollar over the past year, its strongest level since October 2014. It is also hovering at a 15-year peak against the euro.
Bank of Israel Deputy Governor Nadine Baudot-Trajtenberg said Wednesday that “Foreign exchange intervention is very much on the table and we will continue to use it if we think the exchange rate will depress the economy.”
In the last six months of 2016, the Bank of Israel bought $2.6 billion in foreign currency. In January this year, it purchased another $50 million.
The shekel is essentially echoing the dollar’s behavior in world markets: The American currency has been growing stronger against major currencies such as the euro and pound, especially in the context of Brexit and political turmoil in France.
In France, the uncertainty over far-right leader Marine Le Pen’s potential ascent to power and the scandals clouding Republican presidential candidate Francois Fillon’s future in the race have increased concern over the potential dissolution of the euro bloc.
This scenario may see the already weak euro plummet, and it may also further destabilize the pound, despite Britain’s planned exit (a.k.a. Brexit) from the European Union.
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Because this is a significantly edited version of the original article published by Israel Hayom at http://www.israelhayom.com/site/newsletter_article.php?id=40761, Brian Schrauger is included as a co-author of this report. Schrauger is the Editor-in-Chief of the Jerusalem Journal. He can be reached at [email protected]