International Economy Current Events

The first article identified is from the financial news site Bloomberg.com. The author of the article is Shanji Mathew on May 13, 2013. The article is about the decision of the central bank of Israel to cut interest rates by 0.25% points to 1.5% effective from May 17, 2013. One reason for the decision is a result of the constant appreciation of the country’s currency, the shekel, against other major world currencies.

The shekel continues on an upward trend in the recent period. The currency value over the last month appreciated by 2.4%. Furthermore, in the past three months, the currency rose in value 5.4% in terms of effective exchange rates. In the period, the shekel performed especially well against the euro and dollar. Some of the reasons for the appreciation include the start of production of natural gas from Tamar gas field, quantitative easing programs in leading economies and the cutting of interest rates by central banks worldwide.

The second article identified is from the Wall Street journal. The article is by Kwanwoo Jun on May 13, 2013. It is a report on the worries of exporters in South Korea about the declining value of the Yen against the won. The Japanese yen is currently trading at its lowest against the US dollar in the last four years. The yen also depreciated 13% against the won this year.

The appreciation of the yen yields an unfair competitive advantage to the Japanese exporters over those from South Korea. Most hit by the slumping yen are auto manufacturers such as Hyundai and South Korea’s main bourse made of stocks sensitive to performance of the exports. The fears about the competitiveness of the exports are as a result of dollar exchange rate against the yen surpassing a psychological Maginot line of 100. To curtail the fears, the bank of Korea has cut its lending rates while expectations are the finance ministry to take further measures.