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Thursday, January 11, 2007

Morgan Stanley: Shekel Improving Over Dollar, Euro

Despite all that has happened with the Israel over last years conflict, the shekel has steadily been improving and according to Morgan Stanley it may also be seriously undervalued.

(Globes Online) "Imbalances in the US economy and the dollar's depreciation have become an overwhelming theme in global financial markets, triggering significant shifts in portfolio allocations. However, although the dollar is likely to remain weak in the near future, our currency economics team expects it to get stronger towards the end of this year and especially in 2008. Of course, such a turnaround in the dollar's valuation and the reasons behind it would have a range of implications for Israel's economy and financial markets. Nevertheless, we do not see a major risk to our call for the shekel's continuing strength," writes Morgan Stanley analyst Serhan Cevik.

" The dollar's weakness may have been a trigger, but the shekel's appreciation is certainly not just about what has happened to the dollar. As we have long argued, the shekel is fundamentally undervalued against the dollar and even more so against the euro.

Although this news may trigger conspiracy theories about how the Jews are taking over, this probably has more to do with foreigners heavily investing inside Israel.

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