The shekel-dollar exchange rate fell 0.17% in early inter-bank trading this morning to NIS 4.017/$, and the shekel-euro exchange rate edged down 0.02% to NIS 5.503/€. Traders are waiting for Governor of the Bank of Israel Prof. Stanley Fischer's interest rate decision for April, which will be announced at 5:30 pm, and for US Treasury Secretary Timothy Geithner's toxic asset plan, which will be unveiled at 2:45 pm, Israel time.
Fischer is expected to cut the interest rate by 25 basis points to 0.5%, an all-time low. The current interest rate decision is fairly unimportant since the interest rate is approaching zero, and because investors are focusing on the Bank of Israel's other stimulus measures, such as intervening in the bond market.
Friday's shekel-dollar representative exchange rate was set at NIS 4.024/$, 0.64% below Thursday's level, and the shekel-euro representative exchange rate was set a NIS 5.503/€, a drop of 0.14%.
Online foreign exchange broker Prico says that, in Israel, it is increasingly assumed that the new government will be forced to make extensive budget cuts in order to reduce the projected deficit. The fact that the Fed is also acting to lower yields on long-term US Treasury notes, as well as projections of huge deficits, will probably weaken the dollar in the short and medium term.
In the short term, Prico advises keeping an eye on the NIS 4/$ level, which can be expected to provide a support level for the shekel-dollar exchange rate. The next support level below this psychological level, NIS 3.95/$, is very important, because support at this level could support an upward correction, possibly to as high as NIS 4.15/$.
Published by Globes [online], Israel business news - www.globes-online.com - on March 23, 2009
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