The shekel has started a new week by depreciating against the dollar, to NIS 4.8847/$, a 0.9% slide from Friday’s representative rate of NIS 4.842/$.
Some of today’s decline was expected. On the Tel Aviv Stock Exchange, dollar options were trading at NIS 4.86/$ yesterday, a 0.4% depreciation since Friday.
Against the euro, the shekel is currently trading at NIS 4.7829/€, a 0.16% depreciation from Friday’s representative rate of NIS 4.775/€.
This morning, investors woke up to news that Israeli forces had launched a major raid into Gaza, which according to Y-Net left 10 Palestinians dead and seventy wounded. The high number of casualties raises concerns that Palestinians will have an even greater motivation to launch attacks on Israelis.
Weakness on bourses around the world may be another reason for the shekel’s decline. In Europe, the London FTSE is down 1.5% and the Frankfurt is losing 2.75%.
Investors also remain concerned that Israel will be attacked if the US goes ahead with an invasion of Iraq. Yesterday, Israeli newspapers reported that the US would like Israel to keep a low profile from now on, so that energy can be focused on ousting Saddam Hussein.
Worries about the 2003 state budget may also be weighing down on the Israeli currency. The government plans to submit the budget for its first reading in the Knesset at the end of the month. Market sources have noted it is crucial that the budget pass for Israel’s credit rating to remain at A-.
Meanwhile, Bank of Israel figures published yesterday indicate that the public began returning to unlinked assets in August, after increasing its CPI and foreign currency-linked assets in the preceding months.
These trends followed the lower inflation and calmer foreign currency market in summer, after the Bank of Israel raised the interest rate by 2%.
The figures do not include the renewed foreign currency market volatility in September.
Published by Globes [online] - www.globes.co.il - on 7 October, 2002