Trading on the currency market opened with heavy profit taking on estimates Bank of Israel governor David Klein will raise interest rates much sooner than the regularly scheduled announcement of the July monetary program. The shekel gained strongly at the start of trade to NIS 4.91 against the dollar, as banks sold foreign currency and took profits.
However, at such low levels there were buyers on the market, some from the business sector, and demand boosted the U.S. currency in local trade to NIS 4.927, a 0.8% drop off yesterday's representative exchange rate of NIS 4.9680.
The financial markets waited with bated breath for Klein's 11:00 am press conference, where he indicated that he will not raise interest rates now, but said, "if there is a threat to price stability such as devaluation, it will be necessary to consider raising rates before the scheduled date."
Dealing rooms report most activity at this time is intra-bank with many sellers at the high levels the dollar reached in local trade. "There is a great deal of uncertainty and it is expressed in the volatility of the dollar exchange rate," one dealer said.
"The shekel gain is the response to newspaper headlines that Bank of Israel is considering an additional rate hike in the coming days," another deal said, estimating that if such a move doesn't take place, the shekel will slide back to the NIS 5 mark.