Shekel stonger after interest rate decision

The Bank of Israel kept the interest rate for November unchanged at 1%.

The shekel has strengthened against the dollar and euro in morning inter-bank trading today. The shekel-dollar exchange rate has fallen 0.23%, compared with yesterday's representative rate, to NIS 3.521/$, and the shekel-euro exchange rate has fallen 0.40% to NIS 4.853/€.

In international markets, the dollar is traded at $1.379/€ against the euro.

Investors are responding the Bank of Israel's decision on Monday to keep the interest rate for November unchanged at 1%. This was the first interest rate decision by Dr. Karnit Flug as Governor. The central bank's decision was due to its wish to maintain the 12-month inflation target of 1-3%, and to support growth while maintaining financial stability.

As for the foreign currency market, the Bank of Israel said, "From the monetary policy discussion on September 22 through October 25, the shekel weakened by 0.7% against the dollar, even as most currencies strengthened against the dollar. The shekel weakened by 2.66% against the euro, and by 1.5% in terms of the nominal effective exchange rate. Since the beginning of the year, the shekel has appreciated by 5.3% in terms of the effective exchange rate."

In international markets, there is tension ahead of the Fed's interest rate announcement. The Federal Reserve Board's Open Market Committee will convene on Tuesday to decide the interest rate and monetary policy. The market consensus is that the Fed will postpone tapering of quantitative easing until early 2014, because of the economic damage caused by the US government shutdown.

FXCM Israel says this morning, "In local markets, it is not possible to point to any significant factors affecting shekel-dollar trading. Technically, consolidation above NIS 3.52/$ could prepare the ground for a larger upward correction. We will have to wait until at least a breakthrough above NIS 3.54/$. On the other hand, if we again see the dollar slide in international markets, this will pull the shekel-dollar exchange rate down, as movement below the critical threshold of NIS 3.50/$ is liable to pave the way for a fall to a new low below NIS 3.473/$."

Published by Globes [online], Israel business news - www.globes-online.com - on October 29, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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