The shekel-dollar exchange rate fell 0.8% to NIS 3.35/$ in morning inter-bank trading today, while the shekel-euro exchange rate is down 0.15% to NIS 5.326/€.
Friday's shekel-dollar representative exchange rate was set at NIS 3.38/$, up 2% on the day before. The shekel-dollar exchange rate rose NIS 0.18, following the Bank of Israel's announcement on Thursday that it would quadruple its average daily purchases of dollars to $100 million in order to help support the exchange rate. The shekel-euro representative exchange rate was set at NIS 5.3335/€, up 2.5%.
Excellence Nessuah chief economist Shlomo Maoz said that inaction by Governor of the Bank of Israel Prof. Stanley Fischer's would have resulted in a snowball effect, causing companies to go bankrupt, a recession, and drop in tax revenues, which would have forced higher interest rates in the capital market.
Union Bank says that Fischer's act will have little long-term effect on the exchange rate, and noted that the Bank of Israel would have to raise shekels through bond issues in order to buy dollars.
Online foreign exchange broker Prico says that the Bank of Israel's switch from a marginal intervention to a large one might stabilize the exchange rate with a range of NIS 3.28-3.43/$/ Any break through of the NIS 3.43/$ level could cause the exchange rate to rise to NIS 3.50/$ or even slightly higher, as market players exercise stop loss options. Prico predicts that the Bank of Israel will continue to operate in the foreign currency market in an effort to stabilize the exchange rate at NIS 3.40/$.
Published by Globes [online], Israel business news - www.globes-online.com - on July 14, 2008
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