The Bank of Israel’s decision to leave its key lending rate unchanged for April at 0.1%, and to refrain from a quantitative easing program, at least for the time being, has sent the shekel-dollar rate tumbling to below NIS 4.
After the representative shekel-dollar rate was set at NIS 4.018 this afternoon, already 0.86% below Friday’s rate, the exchange rate is now an additional 1.32% lower, at NIS 3.9648.
The representative shekel-euro rate was set at NIS 4.3737/€ this afternoon, 1.04% higher than Friday’s rate, but since the interest rate announcement the rate has fallen back 0.78%, to NIS 4.3397.
Published by Globes [online], Israel business news – www.globes-online.com – on March 23, 2015
LONDON: The euro rose for a second day against the dollar on Tuesday as investors awaited the start of a two-day US Federal Reserve policy meeting that will test expectations of a mid-2015 rise in US interest rates.
The single currency had come under pressure after the European Central Bank began a bond-buying programme last week that will pump more than one trillion euros of newly created money into the euro zone economy.
But the euro won some relief on Monday after weaker-than-expected US manufacturing, industrial output and housing data pushed down US debt yields and cooled the dollar’s advance.
The US currency’s surge since early March has been driven by solidifying expectations that the Fed’s Open Market Committee (FOMC) will point towards a June rate rise by dropping a pledge to be “patient”.
The dollar has gained around 20 percent against a basket of major currencies over the past six months and some investors speculate that the Fed cannot ignore how much that rise reduces pressure on inflation.
Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ in London, reckoned the removal of the word “patient” was “pretty much a done deal”, but that investors were nevertheless eager to take risk off their books ahead of the Fed meeting.
“There are so many other angles that (Fed Chair Janet) Yellen could go at to paint a picture of caution and the potential for the first move to be beyond June,” he said.
“If you’ve been short euro over the past week, you’ve had a good week, and why would you bother running the risk into what is a difficult event to predict?” Having hit a 12-year low of $ 1.0457 at the start of the week, the euro was up 0.2 percent at $ 1.0589 on Tuesday morning. The dollar was around 0.1 percent lower against a basket of major currencies.
Traders will also keep an eye on how other asset markets react to the Fed’s statement and comments from Yellen after the meeting.
“The main point is how Treasury yields respond to the Fed. Despite the removal of “patience”, prospects of a September, rather than June, rate hike may linger, given the dollar’s appreciation and lower oil prices,” said a currency trader at a large Japanese bank.
The dollar inched up 0.1 percent to 121.42 yen, stuck in a relatively narrow range since advancing to an eight-year high of 122.04 on March 10.
The Bank of Japan concluded its two-day policy meeting on Tuesday, at which the central bank stood pat on monetary policy and maintained its massive stimulus. Market reaction was limited because the outcome was as expected.
The shekel has gained against the major currencies this morning. The shekel-dollar exchange rate is down 0.6% in comparison with yesterday’s representative rate, at NIS 3.8665/$ , and the shekel-euro rate is down 1.13%, at NIS 4.3909/€.
FXCM Israel writes in its market review this morning, “The main causes of the dollar’s weakness in the past twenty-four hours were the continued rise in the price of oil and a preference for risk on Wall Street. We have recently been seeing a connection between the recovery in energy prices and positive sentiment on Wall Street. Although in the longer term higher interest rate expectaions for the dollar relative to other currencies should strengthen the dollar, in the immediate term, a continuation of the positive correction in the oil price will weigh on it.
“The shekel-euro rate has fallen by more than NIS 0.05 in the past twenty-four hours and is again below the NIS 4.4/€ level, following the failure of talks between Greece and its creditors in Brussels. The nervousness in trading in the euro can be expected to be high as the next date for Greece’s debt repayment at the end of March nears. While the question marks remain, the shekel-euro rate will fall towards its latest low of NIS 4.35/€.”
Published by Globes [online], Israel business news – www.globes-online.com – on February 17, 2015
Both the U.S. dollar and the euro strengthened further against the shekel on Tuesday after the Bank of Israel announced a cut to its base interest rate on Monday from 0.25% to 0.1%, carried out in part to lower the value of the shekel. Tuesday, the representative rate of the dollar was set at 3.952 shekels, up 2.44% on the day, while the euro rate was set at 4.478 shekels, a rise of 2.68%. Israeli export firms regularly push for steps to undercut the strength of the shekel to make exports more competitive. Israel Discount Bank economist NIra Shamir commented that strength of the shekel has been based on “strong fundamentals” including accelerated economic activity in Israel, adding the Israeli currency is expected to rise in value in the future, but she said, “The Bank of Israel is signaling that it is prepared to join the global currency wars,” referring to competition among countries to devalue their currencies. (Dror Reich)
Teva announces success in test of new drug chronic migraine drug
Teva Pharmaceutical Industries announced on Tuesday that it has obtained positive results from a study evaluating doses of TEV-48125, a drug the Jerusalem-based company is developing for the treatment of chronic migraines, defined as migraines occurring on at least 15 days per month. The study revealed what Teva called “a significant and clinically relevant reduction” in headaches. “Chronic migraine is a challenging, complex and highly debilitating condition that desperately needs effective new treatment options,” said Michael Hayden, Teva’s President of Global R&D and Chief Scientific Officer. The World Health Organization ranked chronic migraines No. 4 in its list of debilitating conditions. In the United States alone, 3.2 million people, most of them women, suffer from chronic migraine headaches. (Yoram Gabison)
Allot Communications to acquire operations of Madrid-based Optenet
Hod Hasharon-based Allot Communications, which develops Internet traffic software systems to optimize broadband and added value services, has agreed to acquire the operations of Optenet, a Madrid-based provider of information security services, for $ 6.5 million in cash and an additional sum of up to $ 26 million, tied to performances benchmarks over a five-year period. The maximum $ 26 million payment would only kick in if Optenet generated at least $ 140 million in sales over the period. Allot expects the transaction to close by the end of next month, and sees the purchase of Optenet’s operations as a way to substantially broaden its information security business from cellular communications companies. Optenet was founded in 1997. It has a staff of 150 and has a customer base of 140,000, including Deutsche Telekom, O2, Orange and Vodafone. (Yoram Gabison)
TASE retreats from record high, energy stocks slide over antitrust decision
Shares on the Tel Aviv exchange generally declined in trading on Tuesday. The benchmark Tel Aviv-25 index was off by 0.15% to 1,501.15 points, retreating from the all-time high that it reached on Monday, while the Tel Aviv-100 declined by just 0.03% on Tuesday to 1,326.86. Trading volume on the day was 1.38 billion shekels ($ 349 million). The Oil and Gas index declined by 3.7% against the backdrop of news that Antitrust Commissioner David Gilo would defer a decision by two months on breaking up the gas monopoly that controls most of the country’s offshore natural gas reserves. (See additional coverage on this page). Shares in stakeholders in the offshore fields declined on the news, including Avner Oil Exploration, shares of which were off by 5.2%, Ratio Oil Exploration, which declined by 4.4%, and Delek Drilling, which lost 4%. In other developments of note, on Tuesday morning Whitesmoke Software released a shelf prospectus that would have it raise 10 million shekels through the sale of shares. (Dror Reich)
(Reuters) – Demand for the European Central Bank’s next offering of cheap four-year loans for banks will not be boosted by cutting the cost of borrowing to match the ECB’s main interest rate of 0.05 percent, a Reuters poll found on Monday.
As part of its plan to prime the euro zone economy with cash, the ECB said in January that banks would be charged the refinancing rate for its targeted long-term loans, or TLTROs, from the March offering onwards.
But 16 of 20 euro zone money market traders polled said the lower cost would not draw more demand.
“Even from the get-go, regardless of what the rate is, the whole package is not attractive for banks and they’ll be reluctant to take up the loans,” said a trader.
Take-up at the previous two TLTRO offerings, in September and December last year, fell far short of the ECB’s maximum.
A large majority of traders also said political developments in the euro zone after anti-bailout party Syriza won Greek elections just over a week ago had not had any material impact on money markets.
The new leftist government has promised to abandon austerity imposed under Greece’s 240 billion euro (181 billion pound) bailout and seek to restructure its massive debts.
But German Chancellor Angela Merkel ruled out a debt writedown for Greece on Saturday and an ECB policymaker threatened to cut off funding to Greek banks if Athens does not agree to renew the aid package.
Next week, banks will pay back 10.0 billion euros of the second long-term crisis loans (LTROs) taken in February 2012, according to the poll. They will repay 10.8 billion euros on Wednesday.
The first tranche of loans matured late last month, with any outstanding balances rolled over to the weekly and three-month ECB operations.
At the regular weekly operation, the poll showed the ECB will lend banks 145.0 billion euros, with 163.8 billion euros maturing this week.
(Reporting by Siddharth Iyer; Polling by Kailash Bathija; Editing by Catherine Evans)
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LONDON (MarketWatch) — The Danish National Bank on Thursday cut its deposit rate by 15 basis points to negative 0.5% in an effort to prevent the krone from strengthening too much against the euro. It’s the third time in less than two weeks the central bank has slashed its deposit rate, following persistent upward pressure on the krone’s peg to the euro. The krone has been strengthening after the European Central Bank launched a quantitative-easing program and the Swiss National Bank ditched its euro cap. The Danish central bank said Thursday’s rate cut came after making purchases in the foreign-exchange market. “By lowering the interest rate again, the central bank hopes investors will find it less attractive to hold Danish kroner,” Steen Bocian, chief economist at Danske Bank, said in a note. “The rate cut emphasizes once again that the fixed-exchange rate policy will be defended. This defense will go on as long as necessary,” he said. The Danish krone weakened against the euro
after the announcement, so that the euro bought 7.4447 kroner, up from as low as 7.4342 earlier in the day. The OMC Copenhagen 20 index
fell 0.2% to 813.80.
LONDON, Jan 22 (Reuters) – The Danish crown fell against the euro on Thursday after Denmark’s central bank cut its key interest rate for the second time in four days, taking it deeper into negative territory in a bid to ward off upward pressure on the currency.
The central bank lowered the certificate of deposit rate to a record low of -0.35 percent, from -0.2 percent, and said the rate cut followed intervention in the currency market. The cut came less than two hours after the European Central Bank announced a quantitative easing programme.
The crown weakened to 7.4457 crowns per euro from 7.4429 before rate cut, having fallen to 7.4540 earlier in the day because of intervention by the Danish central bank.
The central bank has been intervening this week, traders said, after buying 6.9 billion crowns ($ 1.1 billion) in the market between September and November 2014. An intervention often precedes a rate cut in Denmark, and many in the market had expected the bank to reduce rates after the ECB policy announcement.
Danish monetary policy moves in sync with the ECB and the currency peg with the euro is the cornerstone of Denmark’s economic policy.
(Reporting by Anirban Nag; Editing by Jemima Kelly)
Geneva, Switzerland– Switzerland scrapped Thursday its three-year bid to hold down the value of its currency in a shock announcement that briefly set off panic in the markets and risks damaging its economy.
Minutes after the Swiss central bank SNB said it was abandoning the minimum rate of 1.20 francs against the euro it strengthened almost 30 percent to 0.8517 against the common European currency before easing back to 1.0421.
Fearful that a strong franc could dent earnings as it makes local products more expensive, investors dumped Swiss stocks, and by the end of the day the SMI Index in Zurich had lost 8.7 percent to 8,400.61 points.
The impact was felt as far as in Poland where 700,000 mortgages, or 40 percent of the total, are denominated in the franc. The zloty lost a fifth of its value against the Swiss currency, making it more expensive for Polish homeowners to repay their loans.
Given the panic felt especially in the Swiss market, IG analyst Andreas Ruhlmann said that he expected the Swiss central bank to rapidly shift strategies ”to a new one which will better represent the real market conditions.”
Swiss business leaders called the central bank’s decision a disaster, with banking giant UBS saying it would lead to a drop of five billion francs worth of exports and knock 0.7 percentage points off overall output growth.
”I am at a loss for words,” Swatch group’s boss Nick Hayek told news agency ATS. ”What the SNB has sparked here is a tsunami.”
The Swiss watchmaking giant was among top losers on the stock market, with its shares tumbling 16.4 percent while those of the world’s second largest luxury group Richemont slumped 15.5 percent.
Swissmem, which represents the machine building industry which is Switzerland’s second-largest export generator, warned that if the franc remains strong ”the existence of a many companies will be threatened”.
Veronique Kanel, spokeswoman for the Swiss national tourism agency said ”it is clear the strengthening of the franc will have an impact” on visits as the ski season is in full swing.
”We expect a considerable drop in reservations in the coming days, in particular from Germany and Hollande where the clients are most price sensitive,” she added.
The SNB had been defending the exchange rate floor since September 2011 in an effort to protect the country’s vital export and tourism industries, even buying massive quantities of foreign currencies to do so.
The rate was introduced as the eurozone crisis sent investors scurrying to the safe haven currency. More recently, the Russian ruble crisis put renewed pressure on the franc.
But the bank, which less than a month ago vowed to enforce the exchange rate floor ”with the utmost determination”, said Thursday it was no longer needed.
”The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and an extremely high level of uncertainty on the financial markets,” the bank said.
”While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. The economy was able to take advantage of this phase to adjust to the new situation,” the bank added.
Berenberg bank analyst Christian Schulz called the SNB’s announcement a ”Swiss bombshell” while Alpari analyst James Hughes said it would wreck havoc not only on currency markets but also equity markets.
”We suspect that the bank will soon need to intervene against the currency to prevent a further rapid appreciation against the euro,” said Jennifer McKeown, senior European economist at Capital Economics.
To make the franc less attractive, the central bank also announced Thursday it was pushing its interest rate further into negative territory — slashing it by 0.5 percentage points on certain bank deposits to negative 0.75 percent.
Standard & Poor’s said it the SNB’s decision would unlikely have any immediate impact on the country’s top AAA credit rating.
Market players said Bern’s move may have come at this time because it is expecting the European Central Bank to launch a massive quantitative easing programme — which would make defending the franc too costly.
The ECB is meeting on January 22, and is widely seen to launch a controversial programme of large-scale government bond purchase in a bid to keep the bloc from sinking into deflation.
Consumers were stunned by the bank’s decision.
Consumers in Switzerland were rushing to cash in on the sudden windfall, with lines snaking out of currency exchange offices.
”This will save us a bit,” said Charles Gutowski, a 70-year-old wealth management advisor, adding it made vacationing in countries that use the euro more attractive.
In Warsaw, however, the news was greeted with dismay.
”It’s going to be painful,” said Piotr Andrzejewski, who has a mortgage of 120,000 francs. ”My monthly payment will rise between 70 and 95 euros, if the exchange rate stays at today’s levels.”