Will the dollar continue to fall? Forex

The dollar fails to stop the decline against the shekel: a low chases a low. Last Friday and during trading this morning, the shekel touched the exchange rate at 3.23, and these are the price levels we saw during the crisis of 2008 and also in the 1990s. Yet, Chief Economist of Mizrahi Tefahot Bank Ronen Menachem believes that the trend will change and says in an interview with BizPortal “Until now, we have not seen the fiscal factor in Israel, but in my estimation we will see it in 2021 and this will be felt in the foreign exchange market. The current range is a brake area for the strengthening of the shekel. ”

Today, the Bank of Israel again purchased dollars to support the local currency, but for now the dollar

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Ripens and continues to decline. Menachem estimates that the Bank of Israel will not be required to make unusual interventions or tools that have not yet been seen.

The weakening trend of the dollar is similar in the world as well. The dollar index also traded at a two-year low around the 90-point level and last Friday fell even below that. With the opening of the trading week, the index climbed, among other things, following JP Morgan’s announcement of $ 30 billion in repurchases.

What factors do you think affect the weakening dollar?
“Most of the impact is global, given the renewed economic growth and expectations of the impact of vaccines there is less need for the dollar as a safe haven. In addition, we are in a period of relatively significant inflation in the US hitting nominal government yields and therefore less demand for the dollar. Beyond that, the shekel is strengthening for local reasons – strong capital movements entering the Israeli economy and the entry into the World Government Bond Index (WGBI) also affect this.

“On the other hand, there are local reasons that support the weakening of the shekel – We are going to the fourth election in two years, we do not have a budget for 2020 and 2021. Although the rating companies have given up on downgrading the rating for the last time, this could happen in April and it could hurt the shekel. So far we have not seen the problematic fiscal factor in Israel but in my estimation we will see the implications in 2021 and this will be felt in the foreign exchange market. The current range is an area of ​​brake for the strengthening of the shekel.

“Another factor that supported the strengthening of the shekel and may change It is the negative inflation in Israel, when in the US it is positive at the level of 1.5%. When there is positive inflation in a certain country it is usually reflected in the weakening of the local currency. The shekel.

Where can the Bank of Israel influence in order to cause the shekel to depreciate?
“The Bank of Israel is intervening in the foreign exchange market. On the one hand, he states that he does not interfere in market forces, but that he acts when there is an over-appreciation of the shekel. He has recently identified such a period, and is not limited in his intervention. However, in extreme cases a central bank is limited in its ability to protect up to the level of its balances and it should be remembered that the Bank of Israel also does not limit the amount of its purchases except according to the need that exists in the market. ”

“The Bank of Israel can lower the interest rate in the negative territory. This is acceptable and is done in other countries in the world, but its efficiency is good in the short and immediate term, but in the medium-long term it will have less effect in light of the above reasons. ‘Minimum exchange rate’ and buy any amount needed to protect the currency exchange rate. Of course this step is also limited in its ability to affect the long term. A combination of several steps including continued purchases may help. But before all these steps we see a change in trend in 2021 The local reasons that support the weakening of the shekel.

National: Traditionally the dollar has depreciated towards the end of the year
Kobi Levy, head of the market strategy desk at Leumi Capital Markets, also commented on the weakening of the dollar today, saying: “Trading in the dollar’s exchange rate against the shekel today touched a rate of NIS 3.2265 to the dollar – a 12-year low. After rising in recent days amid fears of the virus mutation being discovered in the UK, the dollar has corrected slightly in recent hours, and at the same time contracts on major US stock indices and major European stock exchanges have risen.

“A $ 900 billion emergency package was approved yesterday, and Biden today called it a ‘drop in the ocean’, raising expectations for further fiscal expansions that, if and when approved, are expected to support a further weakening of the dollar. “Gradual decline in liquidity and adjustments made by large local companies to close the current budget year and prepare for next year.”