Hamas Fatah Reconciliation and Forex

The news out of the Middle East is that the two major Palestinian political factions, Fatah and Hamas have reached a deal, reconciliation, after years of animosity. Our interest in this event includes how it will affect foreign currency rates. In general peace deals tend to calm the Forex markets and political and social unrest tends to roil them. However, the Hamas Fatah reconciliation and Forex response may be a bit more complicated. Fatah which controls the West Bank of the Jordan River is still in negotiations with Israel. The goal is a peace deal that will end decades of unrest in this part of the world. But, it turns out that while Fatah has been talking to Israel Hamas has been lobbing rockets from the Gaza Strip that they control into Southern Israel. Hamas denies the very right of the state of Israel to exist which would seem to be a sticking point in any negotiations! Thus there may be an inverse relationship between Hamas Fatah reconciliation and Forex market tranquility.

Lots of Players in a Confused Area of the World

The Israeli New Sheqel currency trades 3.48 to the US dollar. The Palestinian Authority, Fatah, that runs the West Bank does not issue a currency and people use the sheqel or the universally available US dollar. Egypt has been in the throes of political turmoil since the beginning of the Arab Spring and overthrow long term strong man Hosni Mubarak. It takes seven Egyptian pounds to equal a dollar. Syria is immersed in a civil war. It now takes 148,000 Syrian pounds (SYP) to equal one USD. Lebanon which has had its share of civil strife is now dealing with the blow back from the Syrian conflict. Its Lebanese Pound sells at 1,507 to one dollar. And the Turkish Lira trades at 2.15 to a dollar. All or the currencies in this region would do well if peace broke out and all suffer from interminable conflict. The Hamas Fatah reconciliation and Forex response are not the only issues that drive currency prices. But anything that could deliver a peace deal between Palestinians and Israelis would result in long term economic gains and currency gains in the region. Unfortunately, in the near term Forex traders are confined to reading the tea leaves and trading the ups and downs as the region flits from one crisis to another.

There Is an Example to Follow

A while back we wrote about the Forex response to an Iran nuclear deal. Surprise, surprise! Iran and major world powers agreed to a measured reduction in economic sanctions levied against Iran in return for the nation reducing its ability to develop nuclear weapons. And, the USD/IRR chart shows what happens when rational thinking prevails. The Rial immediately went up two and half fold versus the dollar. If Hamas Fatah reconciliation and Forex follow a peaceful path it could be beneficial to all nations in the region. The question is if when Hamas makes a peace deal with Fatah the resulting entity will follow up and make a deal with Israel.