The shekel is strengthening against the dollar and euro in morning inter-bank trading today. The shekel-dollar exchange rate is down 0.12%, compared with Friday's representative rate, at NIS 4.023$, and the shekel-euro exchange rate is down 0.13% at NIS 4.97/€.
The Bank of Jerusalem believes that we have not yet seen a peak in the shekel-dollar exchange rate or in the weakness of the shekel. "The more chatter there is about an attack on Iran, in addition to the weakening economic situation, the faster the shekel will weaken," says the bank in its weekly review.
The Bank of Jerusalem believes that the shekel-dollar exchange rate will continue to move within a range of NIS 4.016/$ and NIS 4.067/$, until a breakthrough in either direction, most likely upwards.
German weekly "Der Spiegel" yesterday reported that the European Central Bank (ECB) is considering setting an upper limit for government bond spreads in Europe. In other words, the yields spread between Italian and Spanish government bonds and German government bonds will not exceed a certain level. The meaning is clear: if investors continue to sell Italian and Spanish government bonds and their yields continue to rise, the ECB will have to intervene and buy the bonds itself.
After German Chancellor Angela Merkel said that she would do everything to preserve the eurozone, Luxembourg Prime Minister Jean-Claude Juncker, who chairs eurozone finance ministers' meetings, said that Greece leaving the euro would not be on the agenda. He cautioned, however, "In the case of a total refusal by Greece regarding budget consolidation and structural reforms, one would have to deal with the question."
"Globes" reported that the heads of the Bank of Israel, the Ministry of Finance, the National Economic Council, and the Israel Securities Authority will meet tomorrow to discuss ways of dealing with worst-case scenarios for the eurozone. In ae worst-case scenario, in which eurozone breaks up, Israel will enter a severe recession, and the fiscal deficit will rise to 6% of GDP.
Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2012
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