Options point to a further strengthening of the shekel this morning, after the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.395/$ - its lowest level since July 18, 2008. The shekel-dollar exchange rate fell 0.13% to NIS 3.391/$ in early inter-bank options this morning and the shekel-euro exchange rate fell 0.32% to NIS 5.021/€.
In international markets, the dollar weakened on Friday against the euro, trading at $1.485/€. The dollar is also trading at its lowest level since 1993 against the Chinese Yuan, at Yuan 6.50/$.
The shekel-dollar exchange rate has fallen over 8% since its high point of NIS 3.71/$ on January 31. The shekel has been strengthening thanks to the dollar's weakness against other currencies, combined with interest rate hikes by the Bank of Israel, which have widened the interest rate gap against the dollar and caused capital inflows.
Last week, Federal Reserve Board Chairman Ben S. Bernanke kept the US interest rate unchanged. The Fed's $600 billion qualitative easing 2 plan (QE2) will expire in June, but Bernanke promised to keep the interest rate at its negligible level for an extended period. In short, monetary tightening is not in the cards in the foreseeable future, in contrast to other countries and the eurozone.
Published by Globes [online], Israel business news - www.globes-online.com - on May 1, 2011
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