The dollar is sharply down 0.5% against the shekel to NIS 4.35. Yesterday the dollar climbed to an all-time high of NIS 4.373.

Traders attributed the drop to profit-taking that began after closing yesterday, when the dollar dropped to NIS 4.365.

Estimates from trading floors suggest the dollar could today fall to a range of NIS 4.345 to NIS 4.35, but expect strong demand at these levels. The traders said that foreign financial institutions were not involved in the recent devaluation of the shekel, which was prompted by the sharp cut in lending rates. The traders estimated that foreigners preferred not to enter into positions in the Israeli market in the last days of 2001.

One trader stated that the dollar has still not stabilized. This is because dollar options expired right after the 2% cut in lending rates, and in the closing days of the year many investment companies are not operating, he explained.

The trader said that the public is still confused and not everyone knows what to do with the money. He believes foreign currency market is also affected by the difficulties surrounding the budget for 2002, which has still to be approved by the Knesset.

Traders expect that the fluctuations in the dollar exchange rate against the shekel will continue up to the end of the year. They believe that once foreigners and other players return to full activity at the beginning of 2002, the dollar will stabilize at NIS 4.40.