Analyst Kasper Lund-Jensen sees the rate rising to NIS 3.9/$ in 12 months.
As the shekel-dollar exchange rate passed above the NIS 3.70/$ threshold today, Goldman Sachs has issued a survey entitled "The fall of the 'unstoppable' shekel." Goldman Sachs analyst Kasper Lund-Jensen writes, "Bottom Line: The shekel has depreciated sharply against the dollar over the past couple of months, ending a 2-year long bull market rally. We argue that further weakness is likely. First, rising deflation risks has recently strengthened the BoI's motive to weaken the currency and we expect the bank to cut rates by 20bp (to 0.05%) in 2014Q4 and simultaneously buy around $750 million of foreign assets (per month)." "Second, the shekel continues to be overvalued according to our preferred valuation metrics despite the recent sell-off. Third, we believe that the strong hedging demand by local financial institutions will weaken significantly in 2015 and that it will be a key catalyst for further currency weakness." "Consequently, we now forecast the NIS/$ rate at 3.70, 3.78, and 3.90 in 3, 6 and 12-months, significantly above the forwards at 3.68, 3.67 and 3.66. While this bearish shekel trajectory partly reflects our bullish dollar view, it also corresponds to a meaningful depreciation in trade weighted terms (approximately 4% on a 12-month horizon)."
Published by Globes [online], Israel business news - www.globes-online.com - on October 7, 2014
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