The shekel posted a new low today against the dollar - NIS 4.553/$. The rate is NIS 0.038 higher than the representative rate set last Friday, amounting to a 0.84% shekel depreciation. The shekel depreciation has three main causes:
- Governor of the Bank of Israel David Klein's statement that "a level of NIS 5/$" would not shock him, and that he would not raise the interest rate, even if inflation deviated by 1% from the target.
- The security escalation, against a background of urgent warnings of terrorist attacks in Israel, within the Green Line.
- Last night's decision by the government to reduce the 2002 budget cut by over NIS 1 billion.
The shekel-dollar exchange rate has risen NIS 0.084 in 10 days, a 1.9% depreciation. Since the decision to lower the interest rate, the shekel-dollar rate has increased by NIS 0.343, a cumulative 8.2% depreciation.
Daily foreign currency trade has averaged $2.6 billion, including $1 billion in cash, since the beginning of January. Foreign banks and financial institutions averaged $1.2 billion in foreign currency trade daily in this period, $207 million of which was in cash.
The shekel depreciated another 0.94% against the basket of currencies today; the shekel-basket exchange rate reached NIS 4.5975. The basket rate is currently 9.4% above the fluctuation floor, its highest level relative to the lower limit since the fluctuation band was instituted. Under the exchange rate method, the shekel can fall another 34.8% against the basket of currencies before reaching the upper limit.
The shekel-euro rate rose 1.24% today and reached NIS 4.0242/€. The shekel rate against the Japanese yen was up 0.98% to NIS 3.4325/yen. The shekel weakened 0.95% against the pound sterling, with the shekel-pound exchange rate reaching NIS 6.5365/₤.
Published by Israel's Business Arena on January 21, 2002