(Web posted 11:10 am) The shekel is posting significant revaluation against the dollar in inter-bank trading this morning at NIS 3.8 to the dollar. This represents a 1.84% drop from the NIS 3.875 representative dollar exchange rate set Friday morning.
The currency basket is also losing ground against the shekel, trading at NIS 4.053, 2% below the currency basket exchange rate. The currency basket rate was set
There is NIS 160 million surplus supply on the foreign currency-linked bond market, and the Tel Aviv Stock Exchange is trading up 1.5%.
Published by Israel's Business Arena August 31, 1998
(Sun. 6:00 pm) Tense Expectancy Toward Resumption of Trading Monday; Shekel Down 6.2% Since Beginning of August
The Ministry of Finance and Bank of Israel are tensely awaiting the resumption of foreign currency trading tomorrow. Bank of Israel will monitor foreign currency market developments continuously tomorrow, but the banks estimate that Bank of Israel will refrain from intervening in trading.
It will be noted that following the publication of the representative rates of exchange on Friday, trading calmed and the dollar traded at a level of only NIS 3.84, down 1% compared to the representative rate of exchange published an hour earlier. Surplus demand in bank trading amounted to only $100 million compared to $300 million the day before. But since bank trading was narrow and there was no one to meet the surplus demand, it was supplied at very high prices.
The banks have reached conflicting estimates as to the probable behaviour of Israeli residents in the next few days. One assessment has it that Israeli residents will seek to repay foreign currency loans and reduce their exposure to foreign currency risks, due to the sharp fluctuations in currency exchange rates abroad. Bank experts note that today, it is uneconomic to take foreign currency credit, even in currencies like the Japanese yen and the Swiss franc, on which the interest rate is still low.
On Friday, the dollar leapt ahead by an unprecedented 2.7% to peak at NIS 3.875. The currency basket rose 3.02% and its representative rate of exchange was fixed at a record NIS 4.1354. The currency basket presently stands 6% above the fluctuation band floor.
Since the beginning of August, the shekel has been substantially eroded, the shekel-dollar exchange rate rising by 6.2%. The basket exchange rate rose 5.3%. The shekel has also been sharply devalued since the beginning of the month against the other currencies. The pound sterling has risen 7.6%, then Japanese yen 7% and the German mark 5.9%.
Since the beginning of the year, the accelerated devaluation of the shekel amounts to 9.5% against the dollar and 9.2% against the currency basket. In annual terms, this represents 15% devaluation, compared to a rise of only 4% in the Consumer Price Index.
Published by Israel's Business Arena August 30, 1998