Banks bullish on Israel meeting OECD standards

Union Bank: Shekel-dollar rate will stay in the range of NIS 3.91-3.98/$ this week.

Bank Hapoalim and Bank Leumi both have a positive take on the OECD’s intention to start accession negotiations with Israel. Bank Hapoalim says, “This amounts to approval for Israel’s joining the world’s preeminent economic club, a move that will especially facilitate Israel’s foreign trade, capital movements, and improve the local economy’s standing in the eyes of the world.”

Bank Leumi notes that the two-year period for OECD accession negotiations will bring about changes and adjustments in the economy so that Israel can become a full member in the organization. This is more good news for the economy and its ongoing streamlining.

Union Bank is also pleased about the OECD invitation, which “will have a direct effect on the cost of raising foreign capital in the future.” The bank predicts that the Bank of Israel will cut the interest rate from the current rate of 3.75% to 3.5% at the end of the month, and that the shekel-dollar exchange rate will stay in the range of NIS 3.91-3.98/$ this week. The closest resistance level is NIS 4.05/$ and the closest support level is NIS 3.80/$.

Bank Hapoalim says, “Israel’s economic standing in the world is steadily improving. Joining the OECD would certainly be expected to improve its standing.” The bank predicts that Israel’s low interest will stay at it present level for the foreseeable future, and says that the reduction in market volatility indicates that investors are confident in the current trend.

Bank Hapoalim warns, however, that political factors that could undermine economic stability. The bank is also worried that the US economy might sink into recession, which is liable to hurt global markets.

On the domestic front, Bank Hapoalim concludes, “The shekel will probably continue to receive support from foreign investment into Israel on expectations that the Israeli economy will continue its strong performance. However, the shekel’s appreciation is probably almost over in view of the low level of the dollar against other currencies, and we may see the shekel depreciate later this year, albeit only slightly.”

Looking ahead, Bank Leumi says, “Trading on the Tel Aviv Stock Exchange (TASE) will be more volatile in the short term, and will be affected by macroeconomic data and political developments in Israel, as well as by trading trends on international markets, especially in the US.”

Bank Leumi predicts, “In the short term, unless there are significant developments in the security and geopolitical arenas, the shekel-dollar exchange rate will be in line with the dollar’s exchange rate against leading currencies. The shekel’s appreciation against the dollar appears to be drawing to a close.”

Published by Globes [online], Israel business news - www.globes.co.il - on May 20, 2007

© Copyright of Globes Publisher Itonut (1983) Ltd. 2007

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