The official shekel-dollar exchange rate was set today at NIS 4.827, with the dollar 0.25% stronger than its representative rate last Friday.

The dollar is gaining further ground against the shekel in afternoon trade.

Shekel-dollar options traded on the Tel Aviv Stock Exchange yesterday reflected a rate of NIS 4.84, up 0.5% from Friday's official rate of NIS 4.815. In fact, against that level, the dollar has weakened by 0.26%.

Last week the dollar strengthened by 1.8% against the shekel on brisk trade. Dealers expect trade to stay lively this week, given the escalating tensions in the Iraqi sphere and violence at home, with those pressures on the shekel counterweighted by the high interest rates on the Israeli currency.

"The market calmed down somewhat today, after some panic evident in the options market yesterday," said Guy Magen, a dealer at the Excellence brokerage. "Traders are back to waiting for political developments regarding the siege of Arafat, and economic developments." He noted that Bank of Israel governor David Klein will be announcing the central bank's key lending rates for October later today, at 16:30.

A key factor behind the shekel's sag last week was traders from London, Magen added, who recognized a resistance level at NIS 4.62 to NIS 4.65 to the dollar, and bought dollars at that level. At the moment, the dollar has a support level at NIS 4.5.

"Breaching that level will set off alarms at the Bank of Israel and could spark another rate hike," Magen said. Although the Bank of Israel no longer intervenes in trade directly, it can do so "verbally" through making announcements, as well as by fiddling with interest rates.

Sources at the Forex brokerage assess that barring unusual events, the dollar may correct downwards to a degree, despite its recent climb. The shekel's attractions due to its higher interest rates cannot be dismissed, they say, although the U.S.-Iraq situation may cause substantial fluctuations in exchange rates. Any progress toward a possible war is likely to bolster the dollar, as could parliament's failure to pass the 2003 budget, Forex added.