Gift: Shekel-dollar rate facing tough climb

Trading in dollar options reflect a slight shekel depreciation to NIS 4.2209/$.

“Apparently, there still remain dollar reserves which accumulated from the shekel’s rapid appreciation over the last two months. Until these have been reduced or used up, the shekel-dollar rate will face a tough climb, even though Governor of the Bank of Israel Prof. Stanley Fischer hopes that the interest cuts will bring the shekel appreciation to a halt,” writes Gift Asset Management in its weekly review.

Gift notes that Fischer has hinted at further interest rate cuts It cites one interesting figure published last week, according to which foreign investors reduced their holdings in local stocks by $140 million in 2006, but increased their investment in local bonds by $2 billion.

In general, funds invested by foreigners are “warmer” in terms of investment timeline and willingness to close positions. This has increased the chance that the dollar could gain more rapidly, assuming that foreign sentiment changes course in the future.

Gift says that the shekel-dollar rate ranged last week was NIS 4.22-4.2625/$. Trading was quite volatile, with the shekel weakening to NIS 4.26/$ at the beginning of the week, and trade affected by the dollar gaining ground against the euro and the weakness in emerging markets. However, holders of dollar reserves sold in quantities once the rate exceeded NIS 4.25/$, thereby halting the weakening of the shekel and driving the exchange rate back down again.

With no foreign currency trading today, trading in dollar options reflect a slight weakening of the shekel to NIS 4.2209/$. The shekel-dollar representative fell 0.31% on Friday to NIS 4.225/$.

Gift says that the shekel currently has support at NIS 4.20/$, and resistance at NIS 4.25/$.

Published by Globes [online], Israel business news - www.globes.co.il - on January 14, 2007

© Copyright of Globes Publisher Itonut (1983) Ltd. 2007

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