The shekel is flat against the dollar and euro in morning inter-bank trading today. The shekel-dollar exchange rate has fallen 0.02%, compared with yesterday's representative rate, to NIS 3.52/$, and the shekel-euro exchange rate has risen 0.12% to NIS 4.756/€.
Massive dollar purchases by the Bank of Israel are behind the weakening of the shekel. Last week, market sources estimate that the Bank of Israel bought $500 million, which is "not a day-to-day" amount.
On Monday, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.521/$, up 0.66% on Friday's rate, and set the shekel-euro representative exchange rate at NIS 4.75/€, up 0.24%.
In international markets, the dollar is stable against the euro, at $1.353/€. The dollar strengthened 0.2% against the pound to $1.627/£, but weakened 0.1% against the yet to ¥100.87/$.
FXCM Israel says this morning, "It seems that the Bank of Israel has achieved a victory in the struggle against speculators. Last week's movement toward the resistance levels of NIS 3.50/$ and NIS 3.51/$ 'threw out' many short traders, and created strong technical upward momentum. Ultimately, the longer-term trend is still downward, and the question now is how far will the correction go?"
In the background of foreign currency trading in the Israeli market, investors in international markets are worried about the crisis in emerging markets, following the Fed's decision to continue tapering its quantitative easing, which traders see as reining in global liquidity, causing a sharp depreciation in the value of currencies and investor flight from these markets.
FXCM Israel says, "This negative sentiment is boosting demand for the dollar, which is a sounder and safer alternative under current conditions, which should also strengthen the dollar against the shekel, which in international markets is an exotic currency with a higher risk."
The markets are now waiting for the US jobs report, which will be published on Friday. Following last month's disappointing report, if this month's report is also disappointing, it could cause the Fed to reconsider the pace of the tapering.
Published by Globes [online], Israel business news - www.globes-online.com - on February 4, 2014
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