The representative shekel-dollar exchange rate jumped 1.42% to NIS 4.729/$ today, after a stormy day of foreign currency trading. The shekel depreciation was a result of the increasing threat of war in Iraq, and the possibility that the elections may be postponed for that reason.
Trading calmed down at noon, but demand for the dollar re-ignited before the representative rate was set, and the shekel continued to fall. The shekel has dipped against the dollar by a cumulative 2% in three days, its steepest drop in a long time.
The renewed rise in the shekel-dollar rate raises doubt about the interest rate reduction planned for Monday. Until yesterday, a moderate 0.2-0.3% cut was considered likely.
The worldwide gold rush by investors continued today, with the price hitting a six-year high of $349 per ounce, 12% higher than the rate three weeks ago. Oil prices are also on the rise, with the price being about $30 per barrel.
Marine and air transportation insurance premiums are expected to increase sharply, if and when war breaks out with Iraq.
In the event of a long war, the pessimists anticipate attacks directed against Israel’s civilian population, which will harm the little investment left after 30 months of the conflict with the Palestinians. At the same time, some believe a war with Iraq would pull the economy out of the recession, provided Israel is not directly involved.
Former Ministry of Defense Armaments Research and Development Administration head Major General Yitzhak Ben-Yisrael recently revealed that the cost of an Arrow missile is $3 million. Israel has also developed the $250 million Green Pine radar system, financed with its own money. The pace of Arrow missile production at the Israel Aircraft Industries MALAM plant has been increased in recent months, in order to boost the stock of available missiles, in case of a missile attack.
The health system has begun to prepare for a possible US attack on Iraq. These preparations, which are being coordinated with the Ministry of Defense, include a contingency plan in the event of an Iraqi attack on Israel.
Some analyses conclude that an attack against Israel is liable to include chemical and biological warfare. Plans have been made to inoculate the population, hospitals are being readied to treat patients, and emergency stores of drugs are being accumulated.
Tourist leaders are unanimous that a war would deal tourism a critical blow. They also believe, however, that the situation after the war would be better than at present.
Published by Globes [online] - www.globes.co.il - on December 19, 2002