The shekel weakened against the dollar and strengthened against euro in morning inter-bank trading today following the US Federal Reserve decision yesterday to taper bond purchases from January. The shekel-dollar exchange rate has risen 0.15%, compared with yesterday's representative rate, to NIS 3.51/$ and the shekel-euro exchange rate has fallen 0.35% to NIS 4.803/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate at NIS 3.5050/$, down 0.171% on Tuesday's rate, and set the shekel-euro representative rate at NIS 4.8193/€, down 0.275%.
At the last meeting under chairman Ben Bernanke, the US Federal Reserve announced that it would reduce bonds purchases by $10 billion per month to $75 billion as from next month. As part of the QE3 quantitative easing program, the Fed has so far purchased $85 billion per month including $45 billion of US Treasury bonds and $40 billion of mortgage backed bonds.
FXCM Israel said, "After months of speculation and contradictory signs, the US Federal Reserve finally last night implemented a first reduction in the scope of bond purchases to $75 billion per month. This is a most dramatic milestone in the global financial market which should dictate trends in the markets in 2014."
FXCM added, "If in the past there were grave concerns that the market would respond negatively to any attempt at tapering, then last night the US Fed could congratulate itself on an achievement by succeeding in explaining this dramatic step in a positive way and presenting it as an expression of faith in an improving economy. The scale of the reduction, $10 billion per month, is only slight and does not change the level of liquidity in the market."
" We saw a most moderate response in the shekel-dollar exchange rate to last night's events and the two currencies continue to move around NIS 3.50/$. The fact that we are also talking about the closing few days of the year has also moderated the impact somewhat."
Published by Globes [online], Israel business news - www.globes-online.com - on December 19, 2013
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