USG Capital believes that the Bank of Israel will raise the interest rate by another 25 basis points at the end of April, after raising it by 50 basis points to 3% last month.
"The sharp rise itself tells us that Governor of the Bank of Israel Prof. Stanley Fischer will focus less on the shekel-dollar exchange rate as an index for deciding on the interest rate, and the determining indicator will be inflation. If the inflation rate continues to climb, the interest rate will rise every month. We believe that the interest rate will be raised by 25 basis points next month," says USG in a survey they issued.
The analysts believe that the shekel-dollar exchange rate will fall toward NIS 3.40/$ over the next three months, in view of the interest rate hikes, and the widening interest rate gap between the shekel and the dollar. "We expect that foreign capital will continue to pour into Israel, despite the Bank of Israel's sanctions against foreign investors. We will see the shekel strengthen against all the currencies in the basket," says USG.
On Friday, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.473/$, 0.23% less than the day before. The shekel-dollar exchange rate fell 2% in the first quarter (3.9% in March), and has fallen 6% from its most recent high point of NIS 3.61/$ reached in late January.
Published by Globes [online], Israel business news - www.globes-online.com - on April 3, 2011
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