What a difference a week made in the currency markets, as exchange rates reversed course from their recent gains. In economic news, the shekel managed to power back up, while the CPI dressed down for the month of January. Elsewhere, the Tax Authority got real on virtual currency, the revamped New Home Price Index stumbled out of the gate, and we even learned that a sabra a day keeps the doctor away. All that, plus our trading desk ponders “what else is news?” in the week to come. Still not sure what we mean. Sit back and relax while we catch you up.
From the IsraTransfer Trading Desk
“All good things must come to an end” was certainly the theme of last week’s currency market trading. After a much celebrated run up to 3.55 less than seven days earlier, the USD/NIS exchange rate seemingly ran out of gas, pulling back off its recent highs to close out Friday at 3.48. Market stabilization in general seems to be the likely culprit and perhaps some profit taking too, however, renewed shekel strength due to some lazy traders may also to blame for the less favorable rate. More on that later….
Looking to the week ahead, with a calendar full economic announcements, including US Gross Domestic Product, we wouldn’t be surprised to see the USD/NIS exchange rate stand still while the new data is digested. In addition, new FOMC Chairman Jerome Powell’s tenure kicks off with his first monetary policy speech on Tuesday, so it wouldn’t be unreasonable to expect the markets to take a wait-and-see approach for any clues on what direction he may take for interest rate hikes and his sense of the state of the US economy going forward as well.
In sterling news, Brexit has made its way back to the forefront as the source of fears for holders of the British currency. After witnessing recent highs of 4.99 back on February 16th, the GBP/NIS exchange rate found itself at 4.87 at the close of last week. At this point it it appears the currency is trading purely off Brexit headlines, rather than market technicals, which has only served to muddy the waters. At this point, we can only hope that sterling keeps a low profile, however, as we’ve mentioned in our recent analysis, should it manage to break through the 5.00 level, it could mean blue skies ahead for holders of the UK currency.
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Bank of Israel Representative Rates
For the Week of February 19th thru February 23rd, 2018
|Currency||Week High||Week Low||Week Close|
|US Dollar (USD/NIS)||3.5542||3.4841||3.4873|
|British Pound (GBP/NIS)||4.9850||4.8491||4.8709|
|Australian Dollar (AUD/NIS)||2.8146||2.7240||2.7349|
|Canadian Dollar (AUD/NIS)||2.8329||2.7416||2.7609|
|South African Rand (ZAR/NIS)||0.3063||0.2973||0.3019|
|Swiss Franc (CHF/NIS)||3.8310||3.7152||3.7247|
Israel Economy Snapshot
Unfortunately three times wasn’t a charm for Bank of Israel in their efforts to weaken the shekel and lift the USD/NIS exchange rate. After making a two-month high of 3.55 just one week earlier, the rate gave back most of its gains that even included a brief trip down to the 3.49 level. While foreign currency purchases by an outside financial institution enlisted by Bank of Israel had been successful in buoying the exchange rate, their taking the day off for the US Presidents’ Day holiday showed it isn’t quite ready to stand on its own without external support – and prompting US dollar holders seeking a better shekel exchange rate to wish that they would just get back to work!
Adding to last week’s renewed strength in the shekel was the report of a decline in the Consumer Price Index for the month of January. Leading the way in price decreases was a nearly 9% drop in clothing and footwear (perhaps courtesy of the Finance Ministry’s new Family Net program?). Besides providing some relief to Israelis when it comes to costs, the price pullback also lends credence to Bank of Israel’s recent intervention in the currency markets, at least in the intermediate term, as it continue to seek an inflationary uptick.
Israel’s Virtual Property Tax
The Tax Authority certainly has their mind on the money, as in how the government plans to treat Israel’s cryptocurrency players. Under new regulation, the “digital coins” will be treated as financial assets rather than currency. The decision will result in different taxable consequences, depending on the type of cryptocurrency activity they engage in.
Israel-based businesses employing cryptocurrency as part of their operations will be subject to a value added tax (VAT) on those activities, the same as they do now for any other product or service. Additionally, those accepting payment in cryptocurrency will also be required to pay a capital gains tax on their profits in them. The tax implications get even more complex the deeper you dig, such as for those that generate digital coins (such as mining farms), as well as entities that derive enough revenue from cryptocurrencies to qualify them as a business. Conversely, those looking to dabble in cryptocurrency solely for investment purposes will not be subjected to Israel’s VAT, however, they will be subject to the State’s 25% capital gains tax on the profits from their trading. Per a memo from the Tax Authority, the new rules and other regulations are effective immediately for the 2018 fiscal year.
Israel Real Estate
It was an auspicious start for the all new district-based New Homes Price Index, as in its first release the Central Bureau of Statistics reported a drop of 1.4% in new home prices. The report, covering both new and second-hand homes, revealed a decline during the period of November-December versus October-November of 2017 in five of the six districts measured. Experiencing the largest decrease were prices in Jerusalem, which retreated by 4.2%, more than double the 2% decline in the second place finishing Northern district. However, not to be overlooked was a disclosure by the Central Bureau of Statistics that reduced price homes from the State’s Buyer Price program accounted for over one quarter of the transactions covered in the New Homes Price Index, so the 1.4% drop may not be an entirely accurate depiction of the current housing market climate.
From the Israel Technology Scene
The family doctor house call is getting a reboot thanks to Israeli startup company, TytoCare. Specializing in the ability to conduct remote doctor visits, or “telehealth,” TytoCare aims to provide the easiest and understandable medical examination experience from the comforts of your home. Using equipment, that by anecdotal accounts, provides more high-quality readings than conventional checkup equipment found in most doctors’ offices, patients are able to transmit the results to their doctor through a secure cloud connection, for real time review, consultation, and diagnosis. Additionally, all the data collected by these medical school educated devices is then automatically sent to the company’s TytoApp where their doctors can then access it any time, on-demand.
To date, TytoCare has three FDA-compliant devices in market across the personal, professional, and even clinical healthcare environments. The company’s next steps include expansion into the US market following a recent capital investment of $25 million. Thankfully, with its ability to deliver reliable remote examination data to physicians, allowing them to make confident diagnoses no matter how far from their patients, a cure for painful doctors’ office waiting room syndrome is not far away!
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.