The dollar gained 1% over its Friday representative exchange rate today and the new representative rate was set at NIS 4.678. Sunday's dollar options trade reflected NIS 4.64.

Following the publication of the January consumer price index on Friday, currency market sources estimated the dollar could weaken ahead of an estimated 0.5% rise in key lending rates, expected next Monday.

The dollar's current strength is attributed to the escalation of violence and a number of terror attacks in the past few days.

Investment bank Excellence estimates that the dollar will in the coming week trade between NIS 4.60 to NIS 4.70. The bank expects buyers for the dollar at NIS 4.60, and sellers for the dollar at NIS 4.70. The bank estimates that Bank of Israel Governor David Klein will next week raise key lending rates by 0.5%, but note that this hike is already incorporated in the price of the dollar. The dollar dropped from NIS 4.77 after Klein a week ago warned the public against the risks involved in dollar instruments.

Moritz & Tuchler dealers agree that a 0.5% interest rate hike is already incorporated in trading and only a sharper interest-rate increase could weaken the dollar. They anticipate that until the hike is announced the dollar will trade at NIS 4.62 to NIS 4.67. The dealers said that investors who bought dollars at NIS 4.77 are beginning to cover positions opened at the present rate of exchange.