The shekel strengthened further against the dollar and euro in trading this morning. The shekel-dollar rate now trades around the technical support level of NIS 3.40/$, the level at the time of the announcement by the Bank of Israel of its intention to intervene in trading earlier this year.
The shekel-dollar rate fell 0.64% in interbank trading this morning to NIS 3.427/$, and the shekel-euro rate fell 0.58% to NIS 5.304/€.
The shekel will now be more attractive to foreign investors, given that the minutes from the recent Bank of Israel monetary policy meeting published yesterday gave a clear hint of Governor of the Bank Stanley Fischer's determination to raise the interest rate as much as necessary to halt inflation. Last month's decision to leave the interest rate unchanged at 3.25% was approved unanimously. The interest rate gap between Israel and the US now stands at 1.25 percentage points.
The Consumer Price Index (CPI) is expected to rise 0.9% in April, the highest monthly figure of the last twelve months. The increase is expected to be higher than usual, despite the usual seasonal factors (such as the holidays in April-May), as the higher food and fuel prices worldwide filter through to the Israeli economy.
Online foreign currency broker Finotec says the mixed trend in dollar trading worldwide has resulted in many dealers switching to bullish positions on the dollar for the first time since 2005. In other words, they now hold long positions on the dollar in the anticipation that it is likely to strengthen in the next few months.
Financial markets are seeing an increase in the number of traders switching over to the greenback. "The dollar is likely to continue to strengthen in the coming months. This is not a sharp correction, but a trend," said a senior foreign currency trader in New York.
Published by Globes [online], Israel business news - www.globes-online.com - on May 13, 2008
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