The shekel-dollar rate fell to NIS 3.9587/$ by midday, down 0.8% from yesterday's representative rate of NIS 3.993/$. This was despite the fact that the US dollar strengthened in the global marketplace against the world's major currencies, although it was weaker against the Japanese yen.
The representative shekel-euro rate was trading at NIS 5.094/€ this morning, virtually unchanged from yesterday's close of NIS 5.0919/€.
Today's foreign currency trading takes place in the wake of important developments. Firstly, there was this morning's announcement by the Ministry of Finance of various measures to intervene on the capital market. The Ministry of Finance will make NIS 11 billion available in capital and guarantees. Secondly, there was last night's decision by Governor of the Bank of Israel Stanley Fischer to sharply lower interest rates by 0.5% to 2.5%.
Online foreign currency firm Finotec, said that since October the Bank of Israel has lowered interest rates by 1.75%, while current estimates by the central bank are that inflation in 2009 will be at its lower target of just 1%. The growth forecast for 2009 has fallen from 2.7% to 1.5% as economic data shows a sharper than expected slowdown and raises the likelihood of additional interest rate cuts by the Bank of Israel in December.
Such a step by the Bank of Israel would cut the interest rate gap between the US and Israel, and the result is likely to be lowering the value of the shekel against the dollar. If such a situation persists then the representative shekel-dollar rate could reach NIS 4.35/$ in the short to medium-term.
Published by Globes [online], Israel business news - www.globes-online.com - on November 25, 2008
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