Fluctuations on the stock exchanges today continued to cause fluctuations in the shekel-dollar exchange rate also, thus proving the inverse ratio between the behavior of the shares market and the shekel-dollar exchange rate. There was no trading in the dollar today, but already this morning call options for the dollar strengthened by double-digit percentage points, indicating a forecast dollar exchange rate of NIS 4.08 or more. This was against a backdrop of heavy share falls on the Tel Aviv Stock Exchange.
An example of what is expected tomorrow in foreign currency trading was today provided by the 400 dollar call option for April (traded deep within the money). This option, which expires within two weeks, jumped by over 100% during the day, involving a forecast shekel-dollar exchange rate of $1 = NIS 4.08, or a 1% shekel devaluation tomorrow.
Traders estimate that the causes for the weakness of the shekel were mainly fear of cashing in by foreign investors on the Tel Aviv Stock Exchange and conversion of their investments into dollars, the transfer of funds from the sinking stock exchange to the dollar, the reduction of issues by Israeli companies overseas (with the emphasis on high tech companies), and the fall in injections of money into the Israeli economy through this channel.
Published by Israel's Business Arena on April 16, 2000