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The representative exchange rate on Thursday was set at NIS 4.635, down 0.28% from Wednesday's NIS 4.6480 and 2.5% short of this week's record high, NIS 4.78. During the session, the dollar fell to NIS 4.6290, about 0.4% less than yesterday's representative rate of exchange.

At opening the dollar had risen some 0.3%, to NIS 4.6630. Dealers relate the weakening of the dollar to mid-month dollar conversions by export firms, and to sales by banks.

The dealers also relate the weakening of the dollar to Bank of Israel Governor David Klein's Tuesday announcement that it is impossible to persist with short-term low interest rates when long-term interest rates do not decrease. The governor cautioned the public against dollar investments.

The dealers said that following this announcement, local banks began selling dollars, as did foreign profit takers. Others closed long positions in order to cut losses.

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The currency market anxiously awaits the publication of the January consumer price index due Friday at 13:30. Economic entities anticipate a 0.8% climb.

It is believed that Klein is going to monitor inflation, although his view is that a single month's CPI is in itself insufficient to indicate a change in key lending rates. Klein evaluates the entire inflation environment and likely developments.

Economic entities estimate that an index above 1% increases the chances of an interest rate hike of at least 0.5% at the end of the month.

According to the central bank, on Monday and Tuesday foreign currency turnover was very high, the dollar rising to a record high on Tuesday. On Monday, cash volume came to $1.3 billion, and on Tuesday, when Klein made his announcement, cash volume grew to $1.6 billion. Total volume, including swap deals came to some $2.8 billion on each of these two trading days.