Housing Prices data helps Sterling

Friday saw the release of the Nationwide building society's monthly report on UK house prices. This data is becoming more and more influential on the foreign exchange markets.

On Friday they reported that house prices went up on average 1.2% for the month of April. Many 'experts' forecast this data to show a decrease in house prices of 0.9%. So the markets took the positive data as a positive sign and as a result Sterling strengthened against all the major currencies. At close on Friday the Sterling v Shekel rate was 6.34.

Is this the start of a recovery in the UK or is it teasing us for worse to come?!

Interest Rates in Israel

Yesterday was a public holiday in the two most active FX trading countries so we saw very little movement in the exchange rates.

What did happen yesterday was the interest rate decision by the Bank of Israel. They decided to keep rates on hold at 0.5%. This wasn't much of a surprise and hence it had little impact on the exchange rates.

The Bank of Israel also said they will continue to be buying $100m every day which should help push the Dollar shekel rate back above 4.....lets hope it stays there this time!

Fall of the Dollar

The Dollar has fallen drastically in the last week to a new low of 3.94. This is a 7% fall from the high we saw at the end of April of 4.256. So why the drastic fall?

There are two things to consider here, firstly what has been happening in the US and secondly what has been happening in Israel.

1) The US Dollar. This has fallen against most of the major currencies over the last week, most notably against Sterling (GBP/USD has gone from 1.5 to 1.59 in the last week). The dollar has weakened for a variety of reasons, most notably investors appetite for risk has increased. 

Normally during any financial turmoil investors put their money in to Dollars as it is considered the safe thing to do. However, now that investors seem to be willing to take some more risks that could give them more rewards they are selling their Dollars (only paying 0.25% interest) and putting them into currencies that may give them more.

2) The Bank of Israel. They have over the last 10 months bought billions of Dollars. They currently purchase on average $100 million a day. This policy has helped strengthen the dollar (or weaken the shekel!) from the lows we saw early 2009 of 3.3 to the highs we saw late April. However, there is a limit to how many dollars they can purchase. 

The Bank of Israel wants a weaker shekel and a stronger dollar to help israeli exports.

Last weak there were rumours that the Bank of Israel is looking for ways of selling their dollars. This has caused the markets to fall. Obviously the Bank of Israel denid this and have stated that they will continue to buy dollars.

So a combination of the two above has caused the shekel rate to plummet over the last week. It is my opinion that the Bank of Israel will do everything in its power to keep exchange rates above 4 and hopefully let them settle above 4.2.

Welcome

Welcome to the Shekel blog. Here I will discuss all things shekel related.

So if you have any interest in following the exchange rates this is the blog for you.

The shekel is a complex currency that has so many factors effecting it. Due to Israel's many political factors as well as being a small country, it can prove to be a very volatile currency.

I will update you daily on what has been happening to the Shekel and Why!

Please feel free to post any comments or questions to the blog.