The US dollar continues to drop in value against the NIS, with the Bank of Israel on Monday morning, 19 Tishrei 5774 placing the rate at 3.515 NIS/$1. This brings a smile to the face of Israelis traveling abroad or buying in dollars on the internet. Car importers are also pleased as for the time being, the car prices are not dropping to reflect the new reality. This yields them a large profit.
On the other hand, exporters and persons paying rent in dollars in Israel are not exactly smiling as their shekels are deteriorating as the dollar continues to fall.
Friday’s (16 Tishrei) closing rate of 3.50 as posted by the Bank of Israel, represents over a two year low for the US dollar. The Bank of Israel is expected to buy dollars this week in an effort to prevent an additional decline in the dollar.
One of the reasons the experts cite for the fall in the dollar is the delayed military attack against Syria.
Whatever the case, an importer paying $1 million for a shipment of cars or electric appliances will earn 170,000 NIS from the drop of the dollar to Friday’s rate. (This of course is premised on the fact that the sale price of these items is not reduced).
If a family is heading to the United States, a package costing $14,000 will net a savings of 2,380 NIS due to the new rate as compared to the same family traveling before Rosh Hashanah. A couple traveling to a high end hotel in Rome of Paris for example, which have a price of $3,000, will save 510 NIS.
While the folks above are smiling, along with internet shoppers paying dollar prices, the exporters and manufacturers sending their good abroad are absorbing the loss. This is also the case for one with a dollar account that is linked to the dollar rate. That means a person with a $100,000 account linked to the dollar will have lost 17,000 NIS in the past month.
While hi-tech workers were the envy of many with their salaries received in dollars, this is no longer a sought after reality.
If you are saving to buy an apartment, good luck. Today, one requires 144 monthly salaries to buy a three bedroom apartment as opposed to 132 months last year and 103 in 2008, Ministry of Housing officials report. The price of the average new apartment dropped 8% in the second quarter of 2013 to 1.31 million NIS but this is still 1% higher than Q2 in 2012. The price drop is attributed to an increase in apartment purchases in outlying areas and other factors.
In Q2 of this year, the average apartment price was listed as 1.22 million NIS and the average monthly salary was 9,238 NIS, leading to the figure of 132 monthly salaries to buy the three bedroom apartment.
The ministry places that number at 144 monthly salaries today.
NOTE: When an apartment is advertised in Israel the number of bedrooms is one less than the number stated since the advertised number includes the living room. Hence, a 4 room apartment/home is three bedrooms and the living room.
(YWN – Israel Desk, Jerusalem)
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2 Responses
It means that Israeli workers will lose their jobs since the goods they produce will be more expensive resulting in decreased demand. For example, products produced by Osem in competition with American companies will now become more expensive, resulting in Osem losing market share and having to lay off workers.
The major reason is that the USA announced it will continue to print $85 billion per month, resulting in the dollar falling against most currencies. Only the US can pull that off, and probably only temporarily. In general, when a country with a not especially strong economy (e.g. Israel) is put in a situation where the currency is appreciating against the American dollar, it is bad news. For a short term its fun to get cheaper exports and being able to afford American vacations, but in the long run it leads to serious hardships. Easy money is like getting drunk – it’s fine at first, but the consequences and hangover are no fun.
True, akuperma, but that is only so long as there is a dollar to rise against. For my brothers, and out of hakoras hatov to my former homeland, I pray that the “poof moment” is long in coming. It is plenty scary though, that with the built in flaws, the irresponsible behaviors, and world power balances, all the forces and actors needed to sink the dollar to nothing are present and pending.