Shekel-dollar rate rises sharply

The Bank of Israel's foreign currency purchasing program and expectations of a further interest rate cut this evening are weighing on the shekel.

The shekel-dollar representative rate rose 3.65% to NIS 3.523/$ today, and the shekel-euro representative rate rose 3.52% to NIS 5.4367/€.

Last Thursday the Bank of Israel unveiled plans to ratchet up its foreign currency reserves by $10 billion over the next two years at a rate of $25 million a day. The announcement of the program was already felt yesterday in trading in the greenback, with shekel-dollar options trading yesterday reflecting a 2.4% increase in the shekel-dollar exchange rate.

Investors waited for this evening's announcement by the Bank of Israel on the interest rate for April amid increasing signs that inflation is slowing, and against the backdrop of the interest rate cuts in the US, the slowdown in economic growth, the low shekel-dollar rate and the widening of the interest rate gap in favor of the shekel.

The Bank of Israel's report will be published in two weeks time, with local forecasts predicting a slowdown in growth to 3-3.3% from 5.3% in 2007.

Published by Globes [online], Israel business news - www.globes-online.com - on March 24, 2008

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