Exporters: 17% of Forex Trading in Israel Is Speculative, Shekel in Danger

Foreign speculators have the power to move the shekel, which could harm Israel, representatives of Big Export warned the Knesset yesterday.

Foreign speculators have the power to move the shekel, which could harm Israel, representatives of Big Export warned the Knesset yesterday. Meanwhile, Big Labor and Big Business have given up on their demand that the Bank of Israel's mandate be expanded from just controlling inflation, and extended to include the labor market and economic growth.

"Seventy-one percent of currency trade is speculative, and is aimed at making a quick profit," Israel Export Institute chairman David Arzi told the Knesset's Finance Committee yesterday, which convened to discuss the appreciation of the shekel against most of the developed-market currencies.

Arzi noted that major international financing bodies such as hedge funds were involved in Israel's foreign-currency market, adding that they have the clout to significantly move the shekel's exchange rate over the short run.

"I am afraid of hedge funds that may include Israel's enemies," he added, intimating that a person in a position to change the shekel's exchange rate against major currencies, could be in a position to do Israel harm. At least at the economic level.

Meanwhile, at the very beginning of the Finance Committee meeting, labor and business representatives promised to stop pushing to change the Bank of Israel Law.

Shraga Brosh, chairman of the Manufacturers Association, made the announcement on the urging of Finance Committee Chairman MK Stas Misezhnikov (Yisrael Beiteinu).

"The focus should be on alternative solutions to the dollar problem. The Bank of Israel governor will deal with monetary policy, and the government will deal with fiscal policy. Interest rate policy should remain in the hands of the governor," Misezhnikov said.

Brosh accepted the position. "We have no intention of jeopardizing the independence of the Bank of Israel. Nevertheless, it is legitimate to hold a public discussion on the central bank's goals. Growth and employment must be a part of these goals. Inflation targets have been missed four times, and industrialists have paid the price," he said.

Misezhnikov called on the government to protect manufacturers and exporters as the dollar sinks. He suggested permanently reducing corporate tax from 29% to 25%, and renewing the regulations increasing the calculated pace of depreciation, which reduces taxes for export-biased sectors, and other steps.

Misezhnikov also suggested that the government hedge exchange rates for temporarily cash-short industries.

Histadrut chair Ofer Eini agreed.

"No one intends to intervene in the central bank's monetary authority. There is no need to get upset when something is said against the central bank governor. Israel has no national saints. The government is entitled to make whatever decisions it sees fit, but it is its duty to hold public debates in times of crisis. Despite repeated requests, nothing happened. We poked at a few sacred cows and suddenly we got what we wanted, a public debate."

Finance Minister Roni Bar-On and Bank of Israel Governor Stanley Fischer did not attend the meeting, but treasury director general Yoram Ariav warned that such decisions should not be made based on gut feelings, but rather thought.

"The American economy is in a state of grave uncertainty. Possible scenarios include a recession, which will affect the Israeli economy," Ariav said.

The treasury director-general told the committee that while he believes the government should provide assistance, the exporters are responsible for obtaining their own exchange rate protection, and half of them have not done so.

"The discussion on the strengthening shekel is legitimate and important, and exporters' difficulties cannot be ignored. But we must shake illusions and dreams of magical solutions," he said.