Shekel lurching toward NIS 5 per dollar

The shekel is lurching toward an exchange rate of NIS 5 to the dollar.

The dollar is now trading at NIS 4.9750 after the Israeli currency spending early morning weakening on news of escalating violence. The shekel then steadied at about ten in the morning at NIS 4.9590 to the dollar, but started to weaken again toward noon.

Dealers surmise that the shekel may well weaken to the level of NIS 5 to the dollar, but then pressure will ease as speculators sell dollars, taking advantage of its high rate.

One factor that could bolster the weakening shekel is fast action by the Bank of Israel to raise interest rates, said one dealer.

News of the huge car bomb at Megiddo junction in northern Israel, in which at least 17 were killed and dozens more badly wounded, has been pressing hard on the shekel today. In previous days pressure had been building up on the shekel due to political uncertainty and central bank statements on monetary policy.

Last night traders at Prico, an investment house that specializes in currency trading, estimated that the shekel has more devaluation potential left. "Despite the shekel's strengthening since the Bank of Israel governor's press conference (in which he declined to raise interest rates further at this time, after a 1% rate hike for June) the dollar may climb back to NIS 5," one of Prico's economists said.

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