Foreign currency trading this week opened with a clear trend to continued shekel devaluation, evident yesterday in dollar options trading.

As trade opened this morning, the dollar crossed the psychological level of NIS 4.5, then climbed repeatedly every few minutes. Banks are now quoting a dollar rate of NIS 4.55, up 1.33% from the last representative rate set Friday at NIS 4.491.

The dealing room at Israel Discount Bank is reporting the buying/selling gaps have increased to about one agora, three times the gap reported on other less eventful days. The uncertainty in the foreign currency market is affecting the deviation from the standard in dollar options, which is nearing 8.5%. Total turnover today is at the pace of more than $1 billion per day, twice the usual average.

Dealing rooms are saying the demand for the dollar is from all sectors, beginning with the public (through the funds), on to the banks, corporations and speculators. Foreign currency market players are estimating that if the devaluation continues, the Governor of the Bank of Israel will be forced to increase the interest rate. In the meantime, banks' analysts have updated inflation forecasts, and are estimating the CPIs of both January and February will climb 1% each.

TST Recommends

The dollar is now completing a 7.5% rise, or 33 agorot, since the interest rate was hiked 2%. Analysts find it hard to predict when the shekel devaluation will be halted, and are suggesting different estimates of the extent of the devaluation. Bank Hapoalim's chief economist estimated yesterday the dollar will reach NIS 4.5 by the end of the year, in which it will fluctuate constantly.