The exchange rate against the US dollar crossed the NIS 4.29 level as investors focused on the interest rate gap.
The shekel continues to weaken two days after the Bank of Israel kept the interest rate unchanged at 3.5%, thereby keeping the 1.75% negative interest rate gap against the dollar intact. The shekel-dollar exchange rate has risen over 9% since its mid-May low point of NIS 3.93/$ as investors worry about the yawning interest rate gap.
In early morning trading, the shekel fell 0.7% against the dollar to NIS 4.2914/$ and fell 0.5% against the euro to NIS 5.776/€. Yesterday’s representative rates were set at NIS 4.262/$, 0.26% higher than on Tuesday, and at NIS 5.7377/€, 0.25% higher than the day before.
Many investors are worried about the shekel’s condition in view of the large amount of money that will be freed up at the end of the month, when Bank of Israel short-term loans and Shahar bonds will expire, releasing NIS 22 billion onto the market. Given Israel’s low interest rate, it is doubtful if much of this money will be reinvested in shekel instruments.
Published by Globes [online], Israel business news - www.globes.co.il - on June 27, 2007
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007