The Tel Aviv Stock Exchange also fell on Wednesday, as stocks went down by 0.8%.
By MAX SCHINDLERUpdated: DECEMBER 7, 2017 03:00US President Donald Trump, flanked by Vice President Mike Pence, delivers remarks recognizing Jerusalem as the capital of Israel at the White House in Washington, US December 6, 2017.(photo credit: JONATHAN ERNST / REUTERS)
With Asian markets falling sharply on Wednesday, along with Israel’s shekel weakening against the US dollar, some investors point to the lead up to US President Donald Trump’s plan to recognize Jerusalem as Israel’s capital as the reason why.Japan’s Nikkei 225 stock average plummeted by nearly 2%, its worst one-day drop-off in more than eight months. South Korean and Hong Kong markets also fell by more than 1%.“This greatly increases geopolitical risks in the Middle East. If people start worrying about a war, it will then of course also have an impact on oil prices,” Norihiro Fujito, a senior strategist at Mitsubishi UFJ Morgan Stanley Securities, told Bloomberg.Israel’s shekel weakened against the US dollar by 0.6% on Wednesday, with the currency trading at NIS 3.5130 per dollar, according to the Bank of Israel. Tuesday’s rate stood at NIS 3.492 per dollar, with Israeli investors purchasing dollars upon hearing rumors of Trump’s announcement.“Purchases of dollars started with the news about Jerusalem,” head of Bank Leumi’s spot currency trading Lior Faust told Reuters. “That definitely was the trigger of the move.”The Tel Aviv Stock Exchange also fell on Wednesday, with stocks going down by 0.8%.A nearby trading partner of Israel, Turkey, is now threatening to cut off ties with the Jewish state if Trump goes ahead with the embassy move. Trade between the countries was worth $3.9 billion in 2016. Most of Israel’s trade goes to Europe and the US.“We will have to wait and see what will be the consequences of the move by Trump and if it will have consequences regarding the geopolitical situation in Israel,” Ori Greenfield, Psagot’s chief economist and strategist, told The Jerusalem Post. “If things will change, then we might have some kind of reaction in the market.”For now, Greenfield said that it was premature to sell stocks, as past turmoil with the Palestinians did not significantly affect the economy.“There is maybe a small effect,” Greenfield added. “We’re going to have to wait to see how things are rolling. From a one-day perspective, it’s too early to say something like ‘we’ll see a real economic effect.’”
