The foreign currency market continued to be volatile, despite Governor of the Bank of Israel David Klein's warning he would raise the interest rate if stability was undermined.
The shekel appreciated today by 0.6%. The representative shekel-dollar exchange rate was set at NIS 4.938/$, after trading at NIS 4.913 in the morning, an appreciation of 1.1% (NIS 0.055), compared with yesterday's rate.
The shekel-dollar rate was NIS 4.995 in inter-bank trading, reflecting shekel depreciation of 1.6%, amounting to NIS 0.082.
London-based banks and Israeli institutional investors (provident funds and insurance companies) entered the foreign currency market en masse yesterday. Foreign currency trading reached an all-time high of NIS 4.1 billion, of which NIS 2.6 billion was in cash. Trading by foreign banks and financial institutions was a record NIS 2.5 billion, of which NIS 1.5 billion was in cash.
Analysts and bank trading room managers said Tel Aviv 25 index players were beating the Bank of Israel at the moment. "30-40 year-old kids were teaching the Bank of Israel a lesson in exchange rates," said an analyst.
Klein said today in a press conference in Tel Aviv, "If the accelerated depreciation generates a real threat to inflation, we won't adhere to the regular timetable, and we won't hesitate to raise the interest rate."
Klein said if he does not see signs of stability, the Bank of Israel might deviate from its regular timetable and raise the interest rate early, to prevent higher inflation. The next scheduled interest rate decision is in three weeks.
During Klein's press conference, the shekel-dollar exchange rate rose by NIS 0.025, from NIS 4.913/$ to NIS 4.938/$, a depreciation of 0.5%.
Published by Globes [online] - www.globes.co.il - on May 30, 2002