Dollar Hits New Low

After reaching its lowest point against the shekel in three years last Thursday, the dollar sunk to even lower depths yesterday: 4.294 shekels per dollar. Tuesday's representative rate reflected a drop of 0.19 percent.

The dollar opened 2006 at around 4.60 shekels per dollar, meaning that it has lost 6.5 percent of its value against the shekel this year.

The euro actually strengthened against the shekel yesterday and reached NIS 5.473.

The last time the dollar was so low was in March 2005, and before that on June 27, 2004 when it traded at a representative rate of NIS 4.283.

The stronger shekel against the dollar is causing serious damage for Israeli industry. Sales losses due to the dollar's dr op are in the $1.5 billion range for next year, according to Shraga Brosh, head of the Manufacturers Association (MAI). According to Brosh, exports will drop by $950 million, and local sales revenues will drop $550 million.

The dollar accounts for 75 percent of all export deals in Israel, making changes in its exchange rate very significant for local industry.

The numbers are based on a broad survey it conducted three years ago. Not only do exporters receive fewer shekels for every dollar of goods they sell overseas, but industries selling to the local market will also lose out as imported goods become less expensive.

Brosh noted that the strength of the shekel stems mostly from positive developments in the Israeli economy: A surplus in the current account, a sharp jump in foreign investment, continued growth and stability.

Therefore, according to Brosh, it is necessary to take steps to encourage exports. He further called on the governor of the Bank of Israel, Stanley Fischer, to lower interest rates slowly and carefully, in order to stop the rise in the shekel.

Foreign airlines serving Israel are not planning to raise ticket prices for now, in spite of the record low for the dollar. While the cheap dollar makes overseas trips for Israelis more attractive, there are no real reports of greater demand for flights from Israel - according to a sample survey of the airlines in Israel.

The dollar's drop occured at the end of the summer and holiday season, and now most of the traffic is for business - for which the price of the dollar is not a significant factor in deciding whether to fly or not.