Euro Weakness Spells Bad News For Exporters

The Israeli shekel bounced off technical support in the ILS3.8500/US$ area last week, and at the time of writing was trading at ILS3.8100/US$. We expect the unit to continue to trade broadly sideways over the remainder of 2010, remaining within a band between ILS3.6500/US$ and ILS3.8500/US$. The Israeli unit currently offers 150bps of carry over the dollar, and although we expect the Bank of Israel (BoI) to leave its benchmark interest rate unchanged at 1.50% when it meets today (May 24), we are still pencilling in 100bps of rate hikes (to 2.50%) over the remainder of the year. Given that

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