With Reuters

Foreign speculators are lifting the dollar at the expense of the shekel on the Israeli currency market, dealers say.

The shekel slipped against the dollar but rebounded from steeper losses earlier in the session on Wednesday, as the September 11 anniversary of the air attacks on the United States maintained the dollar's bid, dealers said.

Trade opened with the shekel-dollar rate hovering at about NIS 4.76. But the dollar climbed as high as 4.7785 on speculative dollar buying by foreign banks, dealers said.

The representative rate was set at 4.7670 to the dollar.

In any case, the dollar has broken out of the range of NIS 4.64-4.74, where it had hovered for a considerable length of time. A technical analyst shows it rising beyond the resistance level of NIS 4.8.

Fears of a repeat attack on September 11 and talk of a U.S. strike on Iraq was said to be behind the dollar demand. "Once this day is over and fears are allayed of a repeat attack then maybe we will see a clearer and more definitive move taking place," Daniel Hass, senior dealer at Bank Hapoalim, told

Reuters

.

Hass noted volumes were fairly low and "moves could be exaggerated due to the lack of liquidity".

"Market players don't want to remain exposed these days, and are looking for shelter," another dealer told TheMarker.

The tax reform coming into force on January 1 which imposes tax on capital gains - and the government's anticipated difficulty in pushing through its tight budget for 2003 in October could also weaken the shekel, the dealer added.

The greenback has expanded by NIS 0.1, or 2.1%, so far this month. Bank of Israel figures show that trading volumes in the forex market are growing, rising to $700-800 million a day compared with the average of $600 million a day in August.

Foreign players have doubled their activity to about $150 million a day, the central bank figures show.

Israel's shekel has been on a rollercoaster ride all year. After sinking more than 14% in the first half, the currency bounced from an all-time low of nearly 5 to the dollar in late June to a high of 4.60 last month.

It settled into a narrow trading range due to a lull in Palestinian attacks against Israelis and a wide interest rate differential with the United States.

But as the September 11 anniversary of the air attacks on the United States approached and as talk of U.S. strikes on Iraq heated up, banks and companies dumped shekels.

Many Israelis fear a strike against Iraq would lead to Iraqi missile retaliation against Israel. During the 1991 Gulf War, Iraq fired 39 Scud missiles at Israel.

The basket of foreign currencies composed of the dollar, euro, pound sterling and yen, was fixed at 4.9763 shekels against 4.9513 shekels on Tuesday.

On the crosses, the shekel traded compared at 3.9785 per 100 yen compared with 3.9743, against the euro at 4.6495 shekels from 4.6298 and against the pound at 7.4217 versus 7.3673.

In late afternoon trading the shekel was at 4.7638 to the dollar.