"In our opinion, an exchange rate of $4.45/$ is the level to begin buying dollars, because the expected long-term trend is still a gradual shekel depreciation," stated the broker Gift in its weekly foreign currency survey.
Gift said the Bank of Israel would probably cut the interest rate by 0.2-0.3% at the end of the month, which would help support the dollar-shekel exchange rate.
Gift added that there was a possibility that coalition problems might intensify, due to Prime Minister Ariel Sharon's plan to evacuate settlers and Minister of Finance Benjamin Netanyahu's planned budget cuts. There is also the risk of a renewed flare-up in the conflict with the Palestinians, who are again seeking to escalate their terrorist activities.
In the coming week, the first support level for the shekel-dollar exchange rate will be NIS 4.45/$. If this level is breached, this could lead to a new support level at NIS 4.20/$, while the resistance level will stay at NIS 4.45/$.
Gift noted that last week foreign currency trading on the local market was thin, with most transactions carried out by professional traders, without the participation of the wider public. There was an attempt mid-week to boost the shekel-dollar exchange rate, due to the local authorities deficit crisis and IDF operations in Gaza. But the rise in the shekel-dollar exchange rate was halted at NIS 4.49/$, largely thanks to comments by US Federal Reserve Board Chairman Alan Greenspan that an interest rate hike in the US was unlikely in the near future.
Netanyahu's initiative to simultaneously cut taxes and the budget should please the capital market and help strengthen the shekel, but there is concern that he may be going too far socially and politically speaking.
Published by Globes [online] - www.globes.co.il - on February 15, 2004