25 September 2015 FX Forecasts and Valuations: Don't throw in the towel Romania EURRON remains tightly managed by the NBR, and has effectively traded within the 4.40-4.50 range since early 2014. We do not expect a change in this managed currency regime or the EURRON range maintained by the NBR. RON remains undervalued on our fundamental valuation metrics, indicating that there is unlikely to be pressure to weaken the currency. Further, the NBR would not want to increase volatility or adversely impact export performance (euro area is Romania's main export partner) by guiding RON stronger in this market environment. In case of excessive downward pressure on RON, the NBR has sufficient fx reserves to defend the currency (fx reserves amount to a relatively healthy 184% of ST debt + CAD). We stay neutral. Israel We expect the Bol to ease monetary policy in the coming months as the growth and inflation outlook has deteriorated. This easing could be delivered in the form of a rate cut or increased fx intervention. But no matter which path the Bol chooses, the end result is likely to be a weaker shekel. In our view, the only reason the Bol would not undertake any of the easing steps noted above is if the shekel were weaker due to other, possibly global, factors (such as broad dollar strength, for example on the back of Fed normalization). However, in this case as well the fx implication is the same - a weaker shekel. We therefore maintain a moderately bearish bias on the shekel and see scope for further weakness despite the recent sell-off; at the very least the Bol is not likely to tolerate much further strengthening past current levels. We prefer to express our view via ILS shorts vs. other EM currencies. In particular, our preferred trade is to be long INR versus an equally-weighted basket of ILS and ZAR: INR (ZAR) is one of our preferred longs (shorts) in EM on fundamentals and central bank 'room' to defend the currency. The basket is also well off t