The shekel advanced 0.3% against the dollar today, extending gains recorded in the two preceding sessions, as investors anticipated the Israeli currency would be bolstered by an expected interest rate cut by the US Federal Reserve.
The Bank of Israel fixed today’s representative rate at NIS 4.358/$, compared with yesterday’s rate of NIS 4.371/$. Against the euro, the shekel gained 0.54% to NIS 5.028/€.
Investors focused on interest rate moves today, as the gap between Israeli and US rates has backed the shekel’s 9% gain against the dollar so far this year. This evening, the US Federal Reserve is expected to announce an interest rate cut of between 0.25% and 0.5% from the current federal funds rate of 1.25%.
On Monday, the Bank of Israel cut its interest rate for July by 0.5% to 7.5%. If the Fed decides later today to lower US lending rates by 0.5%, as some are expecting, the premium offered by Israeli interest rates will stay at 6.75%, despite Monday’s rate reduction.
Yesterday, the shekel advanced 0.6% against the dollar in volatile trading driven by the expiry of shekel-dollar options. Traders say the shekel might strengthen in the coming days due to end of the month currency conversions by businesses seeking Israeli currency to pay for salaries and other expenses.
Published by Globes [online] - www.globes.co.il - on 25 June, 2003