Foreign investors were the dominant force in the FX market in 2020

ISRAEL - In Brief 14 Feb 2021 by Jonathan Katz
Highlights of the weekly macro report:In 2020, FX activity by foreigners was the main factor strengthening the shekel In 2020, foreigners (non-residents) sold 21bn USD in the FX market. The BoI purchased 21.5 bn USD in order to slow shekel appreciation. Israel savings institutions sold 10.2bn FX from Q2 to Q4. The real private sector actually purchased 0.6bn USD in 2020, the sector which represents Israel’s net excess of exports over imports. This basically means that the CA surplus was not really reflected in actual FX trading. The dominant factor in the FX market remains foreigner investors, who currently appear bullish on the shekel due to Israel’s rapid vaccination. Trade data in January point to a decline in industrial exports (following growth in Q420), while imports expanded rapidly. This combination supported an increase in the trade deficit.In 2020, new home sales increased by 14.6% due to low mortgage rates and lower taxation on investors. Unsold inventory declined by 21% in 2020, which supports pressure for higher housing prices.FX: The shekel appreciated by 0.6% last week (against the basket) but remains 4.3% weaker relative to 14.1, when the 30bn FX scheme was announce by the Bank of Israel. In December, Israeli institutions sold FX to the tune of 2.7bn USD, by selling assets abroad of 0.1bn and increasing their FX hedge by 2.6bn.Covid: The economy opens up gradually: The number of infections has witnessed a gradual decline to at around 4-5 thousand per day. Over 3.8 million people have already vaccinated once (over 2.5 million twice), and nearly 85% of all those ages 60 and above. The number of seriously ill and daily deaths has declined and last week the...

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