Citibank analysts did well by their clients in a previous report on the Israeli currency market. Now they recommend stocking up on dollars to prepare for a looming devaluation.

Meanwhile, the Israeli currency market has turned dull, which dealers say is typical toward year-end. "The dollar climbed from NIS 4.20 to NIS 4.40 after the global terror attacks. Lots of investors, including non-Israeli banks, cut a nice coupon from that and prefer not to budge until the year closes," one dealer explained.

Not all are sitting put. Though the dollar seems mired down within a narrow band of NIS 4.21 to NIS 4.25, people who followed Citibank's recommendations in its last research report did well from the dollar's strengthening.

Emerging markets currency analyst Callum Henderson, writing from London, recommended that customers operating in Israel buy dollars at a level of NIS 4.1370 and close their positions on November 1 at NIS 4.27. Those who heeded his advice made a 3.2% profit.

Henderson's research note was the first solid evidence that foreign banks are speculating in the Israeli currency market, albeit in paltry amounts compared with their activity in other nations.

The evidence continues with Citibank's latest recommendation, that customers enter a long position on the dollar. Take advantage of the shekel's over-valuation, Henderson recommends, placing its bloat at about 20%.

In practice, he suggests buying dollars at NIS 4.2370 and selling them at NIS 4.38, for a 3.4% profit. But in any case, he cautions, investors should use a stop-loss mechanism at NIS 4.15 to limit maximal potential loss.

His lack of faith in the doughty shekel begins with the assessment that its strengthening was temporary in nature. In the long run, he assesses, the shekel will weaken together with Israel's economic situation. Third-quarter data indicate that the weakening is spreading, Henderson points out, with tourism diving, investment in housing dwindling, exports and imports both slumping ¿ all of which will ultimately boost the dollar.

Technical analysts also indicates that the dollar has support levels at NIS 4.21-NIS 4.20, he says. Even though the various security events do not tend to shake up the currency market, disputes over the budget or peace could accomplish just that.

Israeli analysts tend to concur that the dollar will strengthen next year, as supply dwindles together with investment in Israel.