Israel Securities Authority may probe HSBC over report

HSBC
HSBC

The shekel is losing more ground in inter-bank trading as the market volatility caused by HSBC continues.

The Israel Securities Authority may investigate the circumstances surrounding the false report by HSBC, which has caused huge volatility in Israel's markets over the past few days. Israeli market sources have voiced suspicions about the report, which contained supposedly precise data about the scale of a bond purchasing program that the Bank of Israel, so it claimed, was about to launch, and which raised allegations of insider information. The document caused severe discomfort within the Bank of Israel, it would be an understatement to say.

Foreign exchange trading sources said today that even if improper motives to influence shekel exchange rates were not involved, the affair makes tangible how easy the Israeli currency is to manipulate, because of thin trading volumes in recent months.

Today alone in the foreign currency market, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.926/$, down 2.29% on yesterday's rate, and set the shekel-euro representative exchange rate at NIS 4.314/€, down 1.363%. In after-market inter-bank trading the shekel-dollar rate fell a further 0.19% to NIS 3.919/$, and the shekel-euro rate fell 0.74% to NIS 4.282/€.

18 out of 22 analysts on the "Bloomberg" panel correctly predicted that the Bank of Israel would keep the April interest rate at 0.1%. But four analysts incorrectly relied on the HSBC report and incorrectly forecast that the Bank of Israel would lower the rate by 0.2% into negative interest.

The incorrect HSBC report was issued last Thursday and in the following 24 hours, the shekel weakened by 1.2% against the dollar to NIS 4.05/$ and by 1.4% against the euro to NIS 4.32/€. Foreign exchange traders pointed out that trading is especially thin on Fridays and susceptible to volatility, when only foreign players are active on the market.

HSBC is not a major player on Israel's foreign currency market but as a big international bank, it still has large influence and prestigious status.

Published by Globes [online], Israel business news - www.globes-online.com - on March 24, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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