After a relatively stable start this morning, the shekel began the familiar trend of weakening towards the psychologically important NIS 5/$ mark.
At web-posting, the Israeli currency is trading at NIS 4.97/$, a 0.68% depreciation from yesterday’s record representative rate of NIS 4.944/$. Traders said the shekel’s latest decline reflected disappointment in the Bank of Israel’s latest monetary policy decisions. On Monday, Bank of Israel Governor David Klein raised the interest rate by 1% after the April CPI shot up by 1.5%.
Investors in the market were hoping for a more aggressive rate increase by the central bank. A market source told "Globes" yesterday that the Bank of Israel should have raised borrowing rates by 1.5 - 2%. “In the end Klein will reconsider his actions and will implement sharper rate hikes,” the trader said. “If he doesn’t do so now, then he will when the shekel crosses into the NIS 5/$ territory.”
Unfortunately, another factor behind the shekel’s weakness is the security situation. Yesterday, four Israelis were killed in two separate attacks in the West Bank. Two days ago, a suicide bomber blew himself up in Petah Tikva, killing a baby girl and her grandmother. This morning, Prime Minister Ariel Sharon is meeting with his so-called “kitchen cabinet” on how to deal with the latest wave of Palestinian attacks.
Published by Globes [online] - www.globes.co.il - on 29 May, 2002