The shekel is depreciating against the dollar and euro because of the IDF's military operation in Gaza and ahead of tonight's interest rate decision by the Bank of Israel. The shekel-dollar exchange rate rose by 0.57% to NIS 3.895/$ in morning trading and the shekel-euro exchange rate rose by 2.4% to NIS 5.549/€.
The euro is up by 0.9% against the dollar in international markets to $1.418/€.
The Bank of Israel will publish the January interest rate at 6:30 pm today. Capital market analysts believe that it will cut the interest rate by a modest 50 basis points, because of the fighting in Gaza and expected volatility on capital foreign exchange markets. Earlier, analysts had thought that Fischer would have to make a larger reduction in order to fight deflation and adjust Israel's interest rate to the US Fed rate of 0-0.25% rate, set two weeks ago.
Senior capital market analysts agree that a short military operation will not cause substantial volatility in capital or foreign currency markets. However, if the fighting drags on causing severe damage on both sides, stock prices could fall in the long term.
The Bank of Israel last set representative exchange rates on Wednesday, before the Christmas holiday. The shekel-dollar representative exchange rate was set at NIS 3.873/$, up 0.99% on Tuesday, and the shekel-euro representative exchange rate was set at NIS 5.42/€, up 1%.
Published by Globes [online], Israel business news - www.globes-online.com - on December 29, 2008
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