The shekel-dollar and shekel-euro exchange rates rose in interbank trading this morning. Investors are now waiting for tomorrow's announcement from the US Federal Reserve on its interest rate for the coming month. Most analysts expect the Fed to leave the interest rate unchanged at 2%, so the interest rate gap between Israel and the US will also remain at 2%. Trading in the dollar has also been affected by global trends and more specifically, the strong macroeconomic data published in the US at the end of last week.
Locally, the shekel-dollar rate has been creeping upward ever since the Bank of Israel announced it would step up the pace of its foreign currency purchases to $100 million a day. This means that the market will face a deluge of shekels, which the central bank intends to absorb by issuing short-term treasury bills later this month to the tune of NIS 7.5 billion, of which NIS 1 billion will be short-term (three months).
The shekel-dollar rate is currently up 0.75% at NIS 3.5413/$, and the shekel-euro rate is up 0.87% at NIS 5.5198/€. The shekel-dollar representative rate was set 1.3% higher on Friday at NIS 3.515/$, and the shekel-euro rate was set 1% higher on Friday at NIS 5.472/€/
Online foreign currency broker Prico says that, in the short-term, the potential for devaluation of the shekel has not yet run its course and that the dollar is likely to rise to NIS 3.56-3.58/$ and, should it break through the NIS 3.62/$ level, reach the previous high of NIS 3.66/$. A breakthrough of the previous high will support an upward surge towards NIS 3.80/$.
The fall of the current account surplus coupled with worsening employment figures and the fear of an economic slowdown are likely to contribute to the weakening of the shekel and the strengthening of the dollar, a trend that is likely to be supported by markets overseas as the dollar strengthens against leading currencies.
Published by Globes [online], Israel business news - www.globes-online.com - on August 4, 2008
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