Despite BoI intervention, pressure for appreciation continues

ISRAEL - In Brief 13 Dec 2020 by Jonathan Katz

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Highlights of weekly macro report:Economic indicators remain generally positive, exports accelerate In Sept-Nov, both exports and imports expanded rapidly, reflecting strong growth in both industrial activity and private consumption, especially after the partial opening of the closure. Credit card purchases declined in the first week of December by 6%, following a strong expansion in November. The level of purchases still remains high. The CBS consumer confidence index improved in November to -20 points from -28 in October, as the closure was partially lifted. The broad level of unemployment (inc. furlough) declined to 14.6% in the 1st half of November from 18.0% in the second half of October. Incoming tourist arrivals in Nov 20 were only 4% of last year’s arrivals. Israelis travelling abroad make up 11% of last year’s departures. FX: Last week, the Shekel appreciated by 0.4% against the dollar and weakened by 0.8% against the Euro. The shekel appreciated by 0.6% against the basket of currencies (4.7% YTD). The BoI purchased 1.9bn USD in November and by nearly 17bn YTD. Despite fairly large purchases, the shekel appreciated by 1.4% against the basket in November. Foreigners continued to increase their purchases of local Israeli government bonds. In October foreigners held 7.8% of the total bond stock, up from 7.6% in Sept, and 5.2% in March. This is due to Israel joining WGBI, a fairly steep yield curve, and strong fundamentals. Bonds: In November, the BoI purchased 4.6bn ILS government bonds and 41.6bn YTD, out of a total program of 85bn. Covid-19 infections continue to accelerate: The number of infections has continued to move higher, averaging 1,500-2,000 per day, a...