The temperature wasn't the only thing on the rise in the month of June, as the USD/NIS exchange rate approached highs not seen in a year.
Meanwhile, Israel’s GDP received a boost after further review, although the housing market continues to take it on the chin. All that plus, Bank of Israel’s pushy approach gets the job done, and Birthright hits the $70 million USD jackpot. Ready to cash in on our month in review? Then scroll down and let’s get to get to it.
From the IsraTransfer Currency Trading Desk
It has certainly been a wild ride for the USD/NIS exchange rate lately. With potential global trade wars looming, and all-too-familiar regional instability, the currency markets had been witnessing a flight to quality, with investors seemingly flocking to the US dollar. Not surprisingly, this resulted in a weakening of the shekel that would ultimately lead to the best exchange rate between the two currencies in over a year. Over the past few trading sessions we’ve seen the shekel regain some of its footing, something we attribute to a combination of thinner trading volume due to the US Independence Day holiday, as well as what appears to be a renewed investor appetite for slightly more risk. All things considered, we view this recent move up in the exchange rate as an opportune time for those looking to convert US dollars to shekels, especially while it remains around its 14-month high.
Money in the Bank (of Israel)
Supporters of Bank of Israel’s sometimes debatable monetary policy received some encouraging news last week, as a report by the government’s financial institution showed off some pretty impressive results when it makes its presence felt. Per the release, interventions by the State’s central bank into the foreign exchange markets have demonstrated a 90% efficacy rate at weakening the shekel since 2009. Furthermore, the study found that the interventions not only had an immediate shekel-weakening effect, but also one that typically lasted 40-60 trading days after the fact. While Bank of Israel’s policy of intervening boasts solid support from Israel’s exporters, it isn’t without its critics, including some analysts who believe it should be halted in order to allow the markets to organically sort out what the exchange rates should be on their own.
Israel Economy Development
Apparently the Israel economy is growing faster than expected. Following a Reuters poll taken in May that pegged GDP growing at an annualized 3.9%, the Central Bureau of Statistics has now revised its estimate up to 4.2% after having taken a preliminary second look of its own. Leading the way in growth for the first quarter of this year were gains in private spending by 9.7% in private spending, as well as a 4.5% rise in exports.
Additionally, government spending saw a climb of 11.5% during the same period, an increase that was second only to investment in fixed assets, which jumped 14.2% led by industry purchases. Gross Domestic Product wasn’t the only economic indicator on the rise either, as the CBS also pointed to a bump in Israel’s annual inflation rate to 0.5% in May, although still below the 1% to 3% target range. That said, Bank of Israel maintains that Israel’s low inflation is not to be attributed to low demand, and has not veered away from its previous indications that an interest rate hike is on the way later this year.
Israel Real Estate News
Although the economy as a whole continues to surge, it looks like those hoping for a turnaround in Israel real estate will need to continue waiting. In comments cited as part of Bank of Israel’s semi-annual financial stability report, the housing market continues to stand out as the area of the economy with the most vulnerability. After years of seemingly endless price increases, the slowdown has definitely taken its toll on on the residential construction industry. Companies that had previously been living on financial easy street, now find themselves mired in a rut of lower sales, along with a glut of unsold homes. Somewhat paradoxically, however, the effect on Israel’s banks has actually been minimal as evidenced by their ability to improve the quality of their credit portfolios while recording higher than required liquidity coverage ratios.
And In Case You Missed It…
Millions and Millions of Reasons to Visit Israel
2018 is certainly shaping up to be the “Year of 70” in the Holy Land, beginning with the State of Israel marking its 70th birthday back in May. Not to be outdone, however, Las Vegas casino magnate and ardent Israel supporter, Sheldon Adelson, along with his wife Miriam, are doubling down (and actually a whole lot more) on the number with $70 million USD in donations to the Taglit-Birthright Israel organization.