The shekel-dollar rate leaped NIS 0.077 to a new record of NIS 4.744/$ at the end of a day of fluctuating and nervous trade, representing a 1.65% depreciation, compared with the representative rate fixed on Friday.
The one-day depreciation is the sharpest since the October 1998 financial crisis. The shekel traded even lower in the morning.
Bank trading rooms believe the foreign currency trend will not change until the Bank of Israel raises the interest rate. The working assumption is that an interest rate hike of at least 0.5% is required to halt the accelerated shekel depreciation.
Foreign currency trading volumes in the past two days have fallen steeply, compared with January. There is no lack of dollars, and for the first time since a 2% cut in the interest rate was announced in December, potential foreign currency sellers (exporters and foreign residents) are only willing to supply the greater demand for foreign currency at a much higher exchange rate.
The shekel has weakened 3.1% against the dollar since the beginning of February, 7.4% since the beginning of 2002, and 12.7% since the announcement of a 2% interest rate reduction in December. The shekel fell 1.84% today against the basket of currencies to NIS 4.7792.
The shekel also plunged 2.34% against the euro today to NIS 4.169/€, completing a 3.1% dive in three days. The shekel dropped 2.42% against the pound sterling to NIS 6.7531/₤ and 1.45% against the Japanese yen, completing a 2.2% fall in three days.
Published by Israel's Business Arena on February 11, 2002