The shekel-dollar exchange rate is continuing its slide in inter-bank trading, staying below NIS 3.30/$. The shekel-euro exchange rate is also continuing to decline, nearing the NIS 5/€ threshold, because of macroeconomic figures coming out of the eurozone.
By midday, the shekel-dollar exchange rate was down 0.75% to NIS 3.26/$ and the shekel-euro exchange rate was down 1.5% to NIS 5.07/€. Yesterday's shekel-dollar representative exchange rate was set at NIS 3.288/$, up 0.09% on the day before, and the shekel-euro representative exchange rate was set at NIS 5.157/€, down 0.34% on the day before.
It is now apparent that the foreign currency market is ignoring the political firestorm ignited by Morris Talansky's deposition and the call by Labor Party chairman and Minister of Defense Ehud Barak to Prime Minister Ehud Olmert "to disconnect himself from the management of the government". The real drama may still be before us, and it remains to be seen if and how it will affect the market.
Harel Finances believes that the dollar is more likely to appreciate than the shekel in the coming months, partly because Israel's growth rate is expected to slow, the country will slip into a current accounts deficit, foreign investment will fall, and overseas investment by Israelis will increase.
Online foreign currency broker Prico still predicts no change in the shekel's potential for appreciation in the short-term. With the shekel-dollar exchange rate at NIS 3.29-3.32/$, the closest support level is NIS 3.25/$, or even lower. However, global capital market instability could cause market players to seek hedges, which could boost demand for foreign currency and end the surplus supply. The Bank of Israel might also buy dollars while the exchange rate is low. In the longer term, Prico predicts that the shekel-dollar exchange rate could rise to NIS 3.80/$ or even higher during the second half of the year.
Published by Globes [online], Israel business news - www.globes-online.com - on May 29, 2008
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