Finance minister rejects foreign exchange intervention

"If we want to join the OECD and the global market, we have to keep the foreign currency market open, free, and accessible."

Minister of Finance Ronnie Bar-On today rejected demands by Manufacturers Association president Shraga Brosh and Histadrut chairman Ofer Eini to intervene in the foreign currency market. Bar-On made the comment during a tour of the Galilee.

"We won't go backwards. We're being told to intervene in the exchange rate fluctuation band, or to give various tax breaks on capital movements, all of which are disqualified. If we want to join the OECD and the global market, we have to keep the foreign currency market open, free, and accessible," said Bar-On.

"The shekel-dollar exchange rate is a function of market forces and the weakness of the dollar against other currencies in the world. Israel has no influence on this," Bar-On added. He nevertheless said that he was prepared to consider any concrete proposals by the Manufacturers Association and the Ministry of Industry, Trade and Labor to reduce the sensitivity of the Israeli market to foreign currency fluctuations, especially vis-a-vis the dollar. "The government bears a responsibility to create long-term solutions that will reduce the Israeli economy's vulnerability. We must develop new export markets that will diversify the use of different currencies," he said.

A Manufacturers Association survey said that the competitiveness of Israeli exporters has been hurt more than that of national competitors. Even though exports to the US account for only a third of Israeli exports, 75% of export transactions are denominated in dollars. Most exporters are required to close deals in dollars, even when the destination of the goods is to other countries, such as in Southeast Asia and Eastern Europe. The Manufacturers Association said that some exporters told it that even customers in the EU demanded that deals be denominated in dollars.

Published by Globes [online], Israel business news - www.globes-online.com - on February 5, 2008

© Copyright of Globes Publisher Itonut (1983) Ltd. 2008

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