US multinational investment bank and financial services company Goldman Sachs noted in its most recent weekly report that Israel's currency the shekel – strengthened 1.5% against the dollar.
Despite the appearance of strength, Goldman Sachs warned, "The strong correlation between shekel and tech stocks could result in shekel weakness in the event of a Blue Sweep in November [victory for Former Vice President and Democratic nominee Joe Biden and Democrats regaining control of the Senate and potentially maintaining control in the House] if this is perceived to result in higher taxes and regulations on the sector – making it an attractive hedge that is also positive to carry," reported Israeli financial outlet Globes.
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The shekel had weakened slightly against the dollar, but it "renewed its strengthening trend" in late September, despite Israel entering its second national lockdown in six months as it attempted to reduce a significant increase in coronavirus cases.
Goldman Sachs assessed that the lockdown would "impose economic consequences on an already fragile economic growth outlook."
The report continued that although domestic developments are important, on balance the shekel's direction would be determined more as a function of external factors, in particular tech, where stocks have reverted to getting stronger.
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The Bank of Israel's response will also be crucial; whether it will permit the shekel to strengthen or if it will purchase smaller amounts of foreign currency to weaken it. In September the bank purchased $280 million of foreign currency as opposed to $14 billion between January and August, reported Globes.
This article was first published by i24NEWS.
