It was an interesting week to say the least with yet another strong performance by the shekel in global trading. Elsewhere, Israel’s diamond industry announced that it is getting set to debut some all-new precious digital gems, the housing market takes up residence in a “wait-and-see” neighborhood, the government gets its house in order, and perhaps the shekel should spend less time in the gym. Ready to travel back in time? Buckle up and let’s get started!
1 – From the Trading Desk
While everyone from major global banks to the Bank of Israel stating the shekel is overvalued, last week saw it strengthen once again. The advances came at the expense of other world currencies, especially against the struggling US dollar, which has now pushed the exchange rate to its lowest level since April 2011.
Despite being a quiet week in terms of economic data, expect movements to be fueled by other factors such as US political news, although perhaps most notably by a perceived “psychological one” now that the USD/NIS exchange rate has dipped below the 3.40 level. As a result we may see institutional orders increase in the hopes of pushing the rate back up above 3.40. All that said, it is a US bank holiday on Monday (Martin Luther King Day) so we’ll just will have to wait until Tuesday to see exactly how the week takes shape, including whether the Bank of Israel continues its previous market interventions of buying US dollars in an attempt to weaken the shekel and push the exchange rate back up.
Bank of Israel Representative Rates
2 – Israel’s Cryptic Monetary Policy
Cryptocurrencies are making their way to Israel as The Ramat Gan Diamond Exchange has informed the Knesset Finance Committee that it is set to issue a digital currency. The yet-to-be-named currency will be backed by 25% of the diamond purchases on the market, and its volatility will be based on a diamond market index.
In other cryptocurrency news, the Israel Ministry of Finance and the Bank of Israel are also exploring the possibility of creating an official Israeli state cryptocurrency, although concerns and challenges remain over taxing cryptocurrency, prohibiting money laundering and terror financing, and protecting investors. Should Israel choose to move forward with its own digital shekel it would join the ranks of Sweden, Japan, and China already who have begun testing the issuance of official state virtual currencies.
3- Real Estate
It was a less-than-stellar week for Israel’s housing market as the Ministry of Finance revealed that home purchases in 2017 were their lowest in six years. Despite the modest uptick in sales during the month of November, skepticism remains that the increase may be due to more working days in from the holiday filled month prior. December data, due out in a few weeks, will provide a better indication of whether the trend has reversed, or if November was merely an isolated event. Stay tuned…
4 – Is the Shekel Too Good for Its Own Good?
After yet another week of gains against the US dollar, the shekel could certainly stand to soften up a bit. After being named the world’s second strongest currency back in November, as mentioned earlier, its hyper-strength has resulted in a US dollar exchange rate now at 3-year lows; already a significant problem for Israel’s big businesses that’s now kicking our olim while it’s down.
5 – Israel 2019 Budget Update
It’s never too early to get ahead on your budgeting, which is exactly what Israel did last week, with the successful passing of its budget for 2019. Among one of the biggest stars in NIS 397.3 billion plan is the Ministry of Finance’s Net Family Plan, intended to assist young middle-class working families take home more of their paychecks – both those with children who do not reach the tax ceiling of NIS 5,000 per month who are entitled to a “work grant” (earned income credit), as well as families who exceed the threshold. Plus, to help further encourage more participation in the job market families with two working parents will receive an extra 30% in grants, and subsidies for after-school childcare have also been alloted in order to help working parents stay at work longer. Furthermore, the plan also covers cuts in taxes associated with the purchasing of shoes, baby clothes, and mobile phones – all in the interests of lowering the cost of living for Israel’s citizens.
Beyond the Net Family Plan, other highlights of the budget include the reduction of prices on private medical procedures, a boost in resources for the State’s national nursing care plan, and an increase in disability benefits – and that’s just to name a few.
Ok, consider yourself all caught up. Have a great week everyone.
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