The shekel is continuing its freefall, due to economic uncertainty arising from business sector worries about post-election instability and the anticipated war in Iraq.
The shekel-euro exchange rate rose another 1.1% today to a record NIS 5.25/€. The shekel has fallen 3% against the euro since Friday.
The shekel-dollar exchange rate rose 0.43% to NIS 4.898/$. The shekel-dollar exchange rate has risen 3.3% against the dollar since January 1, a rise of NIS 0.16. The shekel-euro exchange rate has risen 5.6% in the same period, an increase of NIS 0.26. The shekel-euro exchange rate has risen 35% in the past year.
The shekel’s fall against the dollar and euro slowed in inter-bank trading today, after the shekel-dollar exchange rate breached NIS 4.90/$ and the shekel-euro exchange rate reached a record NIS 5.245/€ in morning trading.
London-based foreign banks led the foreign currency trading today. Only sales by business firms and customers, exploiting the high exchange rates and injecting foreign currency into the market, prevented a sharper fall. Bank dealing rooms believe the current depreciation has largely run its course, assuming there are no extraordinary developments.
Minister of Finance Silvan Shalom believes the situation is temporary. He said today, “The shekel always depreciates before an election. The depreciation will end.” He added that the depreciation was partly caused by uncertainties about a possible war in Iraq. “Israel’s economic stability is praised. We are monitoring developments,” he said.
A summary of foreign currency trading in January, based on Bank of Israel figures, indicates that foreign and Israeli banks were responsible for the stampede to buy dollars and euros, while the business sector and public were relatively calm.
Total foreign currency trading by all sectors fell 6.6% in January to a daily average of $2.25 billion, compared with $2.41 billion in December.
The Bank of Israel has not intervened in foreign currency trading for five years, since 1997, nor is it expected to deviate from this policy.
Published by Globes [online] - www.globes.co.il - on January 22, 2003