The Chanukah gift-giving season certainly came early this year, as the USD/ILS exchange rate experienced some of its most impressive returns in over twenty-four months.
From the IsraTransfer Trading Desk
Since bottoming out in 3.39 back on January 29th, it has now soared as high as nearly 3.74 as recently as November 28th, and is now up 6.5% since January 1st. The rate saw a brief correction on the surprise news that Bank of Israel had increased interest rates by 0.15 basis points to 0.25%, its first hike since 2011. As would be expected the move resulted in an immediate display of shekel strength that dropped the rate back down to 3.70. However, things settled down relatively quickly, the key support level held, and the rate once again found itself back up at 3.73.
Going forward into the final month of the year we see no glaring reason to expect any additional major shekel strengthening, and clearly there is good support now in place for the rate at 3.70. Thus we are tempted to let things play out from here in the hopes that a potential pause to the US/China tariff tensions could be gaining traction for now, thus resulting in a stronger US dollar to close out 2018.
Meanwhile, Brexit continues to dominate the news when it comes to the GBP and the EUR with it being anyone’s guess as to what will happen next. While British Prime Minister, Theresa May, has agreed a deal with Brussels, she now needs to get the approval of the UK Parliament, something we see as unlikely at the moment given the comments made by the MP’s. There are also talks of a new referendum, but even if there were to be one, there would conceivably be no time for it unless the UK was granted an extension of the March 29th deadline for the deal.
All that said, we’ve officially reached crunch time, and in the event of a “no deal,” be prepared to hold onto your hat, because sterling may feel like a downwards roller coaster. Depending on your risk tolerance, those looking to convert their GBP to ILS may want to take advantage of any “up days” during the month of December.
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Bank of Israel Surprises on Interest Rates
Interest at the Bank of Israel was truly at a seven year high last week when in a most unexpected move it upped rates for the first time since 2011. The hike, announced by Deputy Governor, Nadine Baudot-Trajtenberg, comes in the first session since the departure of Karnit Flug. Behind the reasons for the change included Bank of Israel’s conviction that inflation has effectively settled into its target range of 1% to 3%, as well as robust economic growth despite the somewhat pedestrian pace in the third quarter of this year. The move is certainly not without its critics including some who believe it could potentially further dampen the economy’s already slowing pace. However, all that considered, with the move now in the Bank of Israel’s rear view mirror, moving forward economists believe that any new moves will not be seen until at least the second quarter of 2019.
The Israel Real Estate Section
In the hopes of furthering its new Minimizing Use of Cash Law enacted earlier this year the Israel Tax Authority is stepping up its regulatory efforts when it comes to property purchases in Israel. As part of the initiative the government agency will now require prospective buyers to report the source of funds for any real estate deal including those for apartments, lots, stores, and offices regardless of whether the buyers are purchasing for the first time or are repeat investors.
In cases where the buyer is uncertain what the source of the funds will be at the time that deal is signed, the Tax Authority will allow online reporting within six months of the deal closing. Early indications are that this will be facilitated via a soon-to-be-introduced system created specifically for this purpose. We will continue to report on this as more information becomes available, so keep an eye out for updates from us in future editions of the IsraTransfer Report.
Ok, everyone that’s a wrap on 2018. Our best wishes to all for a very happy and healthy remainder of the year, and we’ll see you again in 2019.