The Israeli Sheqel is a currency I've largely dismissed and ignored since well.... forever. I can't think of a time where I thought trading this currency was a good idea. However the game has changed. Bank of Israel intervention in May to devaluate at certain levels of strength is a very significant occurrence, essentially creating a risk-free floor around 3.5 USD/ILS that the currency cannot go under. This is very EUR/CHF reminiscent. The interventionist banker is the friend of those who understand its consequences. Logically, the opportunity lies in buying long USD/ILS as it approaches the floor rate. Previous downward momentum and demand will likely continue to push it back into the floor, so for the time being i'll only be buying into large dips. I'm a couple weeks late to the game, so i've missed some great opportunities here and I have to hope for another dip towards the floor rate of 3.5 in the near future.
On top of the "floor", it seems the Bank of Israel is likely to adopt a more western or mainstream approach to monetary policy. There's a lot of turmoil in the area, and it is probably safe to say that the economy is worse off than it is here or in much of Europe. The new monetary approach is what will ultimately drive the upside to this trade and possibly eliminate my buying opportunities in the near future. In an optimal scenario, the fed will delay the taper (or taper by less than expected), driving the dollar lower and i'll be able to enter long USDILS around 3.54. The scenario isn't too much of a long shot, we'll see if it plays out.
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