Currency trade calms after 2-day tempest: Shekel up 0.14% to NIS 4.876

Dealers estimated this morning that the central question is what the general public does on Sunday

Author:: TheMarker.com Staff
Publish date:: Apr 26, 2002 12:32 PM EDT

After hitting an all-time low of NIS 4.883 yesterday, the shekel gained a little ground today against the U.S. currency and the new representative exchange rate set today is NIS 4.876, down 0.14% from yesterday's representative rate. Nonetheless, since the rate was set at 12:30, the shekel has weakened again and is trading at NIS 4.882 against the greenback.

The Discount Bank dealing room reported that, after two stormy days, currency trade was conducted quietly today and the dollar traded in a narrow range.

The bank's dealers noted that now the only thing one can do is wait for public reaction on Sunday, when the transfer of funds form shekel deposits to foreign currency-linked deposits could strengthen the dollar in local trade to NIS 4.9 or higher.

Investment bank Excellence also estimated this morning that the central question is what the general public does. The bank's currency dealers estimate, based on the activity of the past few days, that the public is likely to continue boosting the greenback and investments abroad, so the psychological barrier of NIS 5 is quickly approaching. In light of the lack of public confidence in Finance Minister Silvan Shalom and Prime Minister Ariel Sharon, only Bank of Israel governor David Klein, by taking initiative and raising interest rates by at least 1%, will be able to stop the shekel's freefall.

Foreign currency specialists Prico Management note that taxing investments abroad could revaluate the shekel, but taxing shekel instruments and similar tax rates on dollar instruments both here and abroad, will encourage change in the structure of the public's portfolio in Israel and support continued shekel devaluation.

Prico estimates that until the Rabinovitch recommendations are public at the end of May and the structure of economic plan the coalition can ratify, the dollar will continue to trade in a wide NIS 4.78-4.92 range. Breaking the upper resistance limit will support shekel devaluation through NIS 5.