Former Governor of the Bank of Israel David Klein says that the Bank of Israel cannot stop the shekel’s appreciation against the dollar. “The Bank of Israel cannot withstand global market forces. Stronger central banks than us tried and failed in the past. We haven’t a chance.”
Klein predicted that the shekel’s appreciation would not end any time soon. “The source of the problem is the US balance of payments deficit, which is not expected to change soon.” He says that other forces causing the shekel’s appreciation, such as the heavy capital inflow are “marginal”.
Klein rejected exporters’ demands for compensation for the shekel’s appreciation. “Exporters are greatly exaggerating their problem caused by the fall in the dollar. They’re protected by their own policies. They know how to defend themselves. This is a development that we’ll have to live with. While it’s a vote of confidence in the Israeli economy, more than that, it’s a no confidence vote in the dollar, and I wouldn’t take any consolation from that.”
Klein added his voice to calls for the public to wean itself off the dollar linkages. “Every month, I ask why people don’t switch to the shekel in some sectors. It seems to be a strong inertia of habit, which, so long as it causes no losses, Israelis won’t abandon the dollar and switch to the shekel.”
Published by Globes [online], Israel business news - www.globes.co.il - on May 9, 2007
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