DOLLAR CONTINUES TO APPRECIATE AGAINST THE SHEKEL

If trend continues could reach symbolic 4 Shekel marNov 19, 2014, 08:45PM | Yoni Ariel

Holding on to the Dollar Google Images

The current rally of the US dollar in world markets has also seen the US currency rise in value against the shekel. Over the past six three months the dollar has steadily risen against the Shekel, from approximately 3.45 to a current 3.83.

This trend, which is unlikely to change anytime soon, reflects several economic developments both international and domestic.

The US economy is steadily improving. Although the purchasing power of most American households still has to reach its pre-2008 levels, the overall picture is positive. Unemployment is down, growth and productivity are up and inflation negligible.

This in sharp contrast to most of the world. The Euro zone is at best flat. France and Italy are hovering on the brink of recession, and even perennial Euro locomotive Germany is not exactly generating a full head of steam.

China is also registering lower growth rates, and is trying to deal with a broad range of structural problems. Japan and India, Asia's other major economies are also, in questionable shape. Japan's "Abenomics" experiment has not lifted the economy as much as had been hoped. In India PM Modi is still dealing with the messy inheritance left him by the previous government, which basically tread water for most of its term, in office.

Israel is also no longer the OECD wunderkind. The days when it registered the highest growth rate of any developed economy have passed, and current growth rates are spectacularly mediocre.

International political crises have also contributed to the Dollar's rise. For all the talk of American weakness, indecisiveness and decline, and its inept diplomatic performance, especially as pertaining to the Middle East, when the going gets tough, the tough and not so tough get going straight to the Dollar, which, in times of crisis and uncertainty (Iran, IS, Ukraine) still remains everybody's preferred comfort zone .  

Since none of these underlying conditions is likely to change anytime soon, the dollar can be expected to continue appreciating, and the Shekel to depreciate accordingly.