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A Real-World Example

Paying at the Shar Hayatzig

Lets say that you had to pay the seller a payment of $300 000 on July 1st. The contract stated that the seller was to be paid in Shekels (as they most often do), at the Shar Hayatzig the day. The contract stipulates you have until 11am on the day to pay at that days Shar Haytzig (most contracts use 11am as a cut off). If the funds are received after 11am the rate used is the new one being set at 3:30pm.

The morning of the 1st you call up you bank in Israel and (if you manage to get through) you instruct your account manager to convert the equivalent of $300 000 into shekels at and to wire the shekels to the sellers account before 11am.

Since the rate was set by the bank of Israel at 3:30pm on the day before (i.e. the 30th of June), its quite possible that the current rate in the market has changed. So the bank converts your money and takes its commissions, charges and fees and gives you a retail rate of approximately 1.25% less than the current market rate. Now if the shekel weakened only .5% overnight (which is not very much) you have to add a total of 1.75% of the funds due.This means that on the amount of $300,000 you will need to add an additional $5,250 to pay your seller the $300,000 because of the exchange rate differential.



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