Bank of Israel stayed true to its word with more aggressive intervention that included some creative measures. Meanwhile, it was love at first site for Knesset and the State’s proposed 2019 budget, however, US expats with businesses abroad experienced some heartache. Plus, virtual currency rocks Israel’s Diamond District, and the revolutionary Israeli startup that no one is gushing over. All that, plus the currency trading weekly forecast from the IsraTransfer trading desk. Ready to get started? Read on and let’s go.
From the IsraTransfer Currency Trading Desk
Whoever coined the phrase “can’t get too much of a good thing,” clearly must have been talking about the currency trading markets. In a continuation of what’s looking like a new short-term trend, the USD/NIS exchange rate held its gains from the week prior. Trading most of this past week above the 3.50 level, we witnessed a surge on Friday, similar to its trading two weeks ago, to close at the 7-day high of 3.55. The reaching this level may prove to be cause for some celebration, as the rate has only seen these highs twice (albeit very briefly) since September last year. Adding to the intrigue was a report from Globes that the Bank of Israel has enlisted the services of a big foreign bank to help push the USD/NIS exchange rate even above 3.60 (more on that later!). With this in mind we may see the rate attempt to reach 3.60 sooner rather than later, although in our opinion we wouldn’t be surprised to see its momentum slow a bit and even revisit 3.50 mark first.
In keeping with the positive trend, following on from the previous week’s positive sterling news and movement, the GBP continued to improve against the shekel, closing out the week at a high of 4.992 on Friday. We attribute the activity purely to momentum from previous week, in addition to some coattail riding off the increasing USD/NIS exchange rate. The next obvious target for the GBP/NIS exchange rate is 5.00, and if it breaks through there there…the next stop is anyone’s guess!
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Israel Economy Snapshot
Fresh off the heels of its promise of more aggressive intervention, Bank of Israel has expanded its efforts to curb shekel strength and improve the recent lackluster USD/NIS exchange rate. While last month saw the government’s largest purchase of foreign currency ($1.8 billion USD), this past week featured somewhat unconventional tactics by BoI of “outsourcing” foreign currency purchases to major global financial institutions in attempts to get the USD/NIS rate back above 3.60. The approach seems be getting the job done, as a new two month high on the USD/NIS exchange rate (3.54), and a twenty month high on the EUR/NIS (4.37), were both successfully achieved as quickly as the middle of last week.
Not to be overshadowed by Bank of Israel, the Knesset made news of its own in approving the State Budget for 2019 in its first reading. Despite clearing the initial hurdle, the budget will still require two additional rounds of approval before it can be finalized. The budget includes a slew of reforms including national nursing program, shortening the working week, increasing housing supply and a whole lot more. The budget aims to ensure that long-term positive economic trends are maintained, while continuing to benefit the welfare of all of Israel’s citizens. Minister of Finance, Moshe Kahlon, hails the budget as “a direct continuation of the social revolution that we have been leading in Israel in recent years," as the ministry furthers its attempts to reduce the State’s social gaps.
Israel Tax News
Major multinational corporations conducting business overseas aren’t the only ones potentially about to be hit hard by recent US tax reforms. As part of the new law, American expats holding at least a 10% stake in a company operating outside of the US, with 50% or more American ownership (known as controlled foreign companies or CFCs), will be subject to a 15% tax on the profits – regardless of size.
In what is being described as an “unintended consequence” of the new legislation, expats with a stake in a CFC will be forced to pay tax on this money twice, first as a repatriation tax to the US now, and then later to Israel when the CFC distributes its accumulated profits. Furthermore, all profits of these CFCs that accumulated between 1986 through December 31, 2017 are treated as income to their US parent company (or in this case the American expat living in Israel). Compounding the problem even more are doubts that expats paying this repatriation tax to the US starting December 31, 2017 will not be entitled to tax credits in Israel despite the existing tax treaties between the two countries. As is always the case we highly suggest checking with your tax advisor to see how these new changes might affect you.
Israel’s Chips Off the Old Blockchain
Israel’s Diamond District is officially going all in on blockchain technology with the unveiling of its two new digital currencies. The Cut, will be first to hit the market and will be available only to dealers on a peer-to-peer basis and registered on blockchain as the industry looks to tackle the increasing challenges of moving money between traders and retailers. Unlike physical diamond pricing, which is based on four factors, The Cut will be based on an index of fourteen characteristics, and determined by an algorithm that takes into consideration the uniqueness of each diamond.
A second virtual currency, The Carat, will be issued later for use by institutional and retail investors looking to invest in the diamond market without taking possession of physical diamonds. While skeptics of investing in cryptocurrencies cite wild trading activity and unclear valuations as major risks, in the interests of keeping both The Cut and The Carot much less volatile, 25% of the market value of both will be backed by diamonds held by a third party.
From the Israel Technology Scene
Paramedics, surgeons, and first-responders worldwide are soaking up the good news, as the WoundClot bandage by Israeli medical technology company, Core Scientific Creations, is now available in over 30 countries. Manufactured from plant cells features, and with the ability to absorb over 2,500% of its own weight, the innovative first-aid product is especially valuable in critical time-sensitive situations such as stab wounds and internal bleeding where the use of compression can actually do more bad than good. Citing a 2009 study published in the New England Journal of Medicine, blood loss is responsible for over 50 percent of deaths occurring within 48 hours of traumatic injury, so hopefully plenty of lives will be saved thanks to this game-changing Israeli medical advancement .
Ok everyone, consider yourself officially caught up. Have a very enriching and prosperous week from all of us here at IsraTransfer!
Looking for the best way to transfer funds to Israel? IsraTransfer Ltd. is Israel’s leading currency exchange firm specializing in wire transfers of US Dollars, British Sterling, Canadian Dollars, Euros, and more to Israel. Founded in 2008, and with over 1 billion NIS exchanged, we are the exclusive operators of the AACI Currency Exchange Program.