After several months of stability, the shekel-dollar exchange rate has been back in the news in recent weeks. The shekel-dollar exchange rate fell 6% in May, and is now below NIS 4/$, a level not seen since the beginning of the year. The Bank of Israel today set the shekel-dollar representative exchange rate at NIS 3.932/$, up 0.54% from yesterday.
The recent weakness of the dollar raises the question whether this is a temporary matter, which can be exploited to make quick profits, or if it is the start of a trend that could send the shekel-dollar exchange rate down to levels last seen a year ago.
"The shekel could strengthen to NIS 3.70/$ within three months, and to NIS 3.60/$ within a year," says Barclays Capital in a special report on the shekel. "It is worthwhile exploiting the situation and buying call options on the shekel."
However, before considering the attractiveness of investing in the shekel, it is important to note that the weak dollar is a global matter, and not a matter of a strong shekel. The dollar has weakened against most leading currencies in recent weeks. It has fallen 7% against the euro to $1.416/€.
A capital market source said, "The dollar's weakness against the shekel is not an Israeli story. There is no market failure here, and there are no preventative measures that the Bank of Israel can take, or should take. We're talking about a global trend."
Published by Globes [online], Israel business news - www.globes-online.com - on June 3, 2009
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