As the shekel continued to strengthen against the dollar in inter-bank trading today, the market is waiting tensely to see whether the Bank of Israel will again intervene and buy dollars. So far, it hasn’t. The shekel-dollar exchange rate is now at its lowest point since December 2008.
The shekel-dollar exchange rate fell 0.16% to NIS 3.708/$ in inter-bank trading by midday today, while the shekel-euro exchange rate rose 0.08% to NIS 5.526/€. The Bank of Israel set yesterday's shekel-dollar representative exchange at NIS 3.714/$, down 0.38% from the day before. It set the shekel-euro representative exchange rate at NIS 5.522/€, up 0.32%.
The Bank of Israel appears to be refraining from intervening because the shekel is weakening against the euro. The Bank of Israel considers the shekel against the basket of currencies when discussing whether to intervene in the foreign currency market. Since the shekel is both strengthening against the dollar and weakening against the euro, the effective exchange rate, as represented by the basket of currencies, is in fact stable.
The market is also waiting for the Central Bureau of Statistics to publish the Consumer Price Index (CPI) for September tomorrow. Analysts expect the CPI to be quite low. If, however, it rises strongly, the analysts believe that Governor of the Bank of Israel Prof. Stanley Fischer will raise the interest rate for November by 25 basis points to 1%
Published by Globes [online], Israel business news - www.globes-online.com - on October 14, 2009
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