Even during these unspecified times, shekel maintains his strength against the world's major currencies. In the morning of banks, the dollar exchange rate decreased by 0.41 % at 3.577/$ and Shekel – the euro rate by 0.05 % at 3.724/€ NIS.
Yesterday, the Bank of Israel set the HEKEL-DOLLAR representative rate of 0.111 % from Tuesday, at 3.592/$ NIS, and the Shekel-Euro rate is 0.635 % at 3.726/€.
Kobby Levi, the head of the Bank Leumi Strategy, “Globes”, tells that since the ceasefire on the various fronts of Israel, there has been an improvement in trade and financial business in Israel, which was also expressed by strengthening a shekel against the pioneering currency basket. The image in the foreign exchange market, and market data that shows the possibility of increasing the Shekel's estimate, raises the issue of whether the owners of the governor who suffer from a large exposure to foreign cash have a cause of hedging from their investment portfolio.
Whether you are investing in stocks in Wall Street or in European indicators – you are subject to changes in currency prices. When you strengthen the shekel against the dollar, the value of your investment decreases in Shekel, and vice versa – when it weakens, the investment deserves more. For the Israeli investor, trading in other global currencies is derived from a shekel against the dollar. The fluctuations in the currency market are the reason that investors use financial tools to hedge from exposure to the foreign exchange, in order to protect their wallet.
Each investor must prepare for potential scenarios
After the great improvement that is already reflected in a large extent in the prices of financial assets and given the great uncertainty in the local and global geopolitical context, there may be a number of possible developments that may affect investor decisions.
In Levi's evaluation, each investor must evaluate any of the potential scenarios that you will achieve. “Options can be divided into three main scenarios: central, optimistic and pessimistic. The interest rate will decrease the bank of Israel once or twice during the next year, and no bad things will occur in terms of security.
“Estimates indicate that the average dollar exchange rate against a shekel in the next year will be in the range About 1 % next year) Levy explains that “for investors who appreciate this scenario will be achieved, the recommendation is to hedge foreign exchange rates higher than NIS3.60/$.”
The central scenario has pessimistic differences. In the pessimistic scenario, which sees a deterioration in the security situation, one or more collapse of the ceasefire and return to intense fighting, with threats from additional countries in the Middle East, will increase the exchange rate and may reach the level of NIS 3.70-3.80/$ . Another risk factor may lead to a decrease in the shekel's value is a sharp decrease in global stock markets. According to the previous experience, during the declines in the global stock markets, Shekel weakens.
“According to different indicators, we appreciate that this relationship will continue in a state of decrease in global stock markets. Therefore, for investors who believe that these pessimistic scenarios will be achieved, it is not appropriate to hedge the exposure of foreign currencies at the present time exchange rates around 3.55- 3.60/$.
“There is a justification for simultaneous exposure to other foreign currencies.”
Finally, optimistic scenario should also be seen. In Levi's evaluation, the possibility of achieving it is reasonable. In the event of the fastest growth expected in the trade activity in Israel, or in the event of significant progress in the normalization agreement with the Kingdom of Saudi Arabia, a shekel will be sharply estimated. “In such a scenario, the improvement in the basics of the surplus in the current account and the capital flows will be sharp and fast, and a shekel is expected to be strengthened towards the NIS 3.40/$ or even less.”
Its recommendations for investors who appreciate that this scenario will be achieved is the hedge from exposure to foreign currencies at the current rates of 3.55-3.60/$.
Levy notes that these scenarios focus mainly on exposure to the US dollar, when the dollar was expected to continue to be a strong currency. But in his opinion, things should be seen from a broader perspective. “Shekel is strong at historical levels against the euro and against the pound sterling – currencies that were less than the dollar, each for its own reason.” Those who choose to hedge from their exposure against the dollar, there are great justifications for one time to undergo exposure to these currencies. “
Full disclosure: The week's question is the “Globes” editing project that is implemented in cooperation with the Bank Leumi experts. The above should not be considered a recommendation or alternative to the independent judgment of the reader, or an invitation to perform any purchases, investments,/or procedures or transactions. It is not a substitute for personal investment advice that takes into account the needs and data of each individual.
It was published by Globes, Israel Business News – En.globes.co.il – on February 13, 2025.
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