The panic that gripped the foreign currency market has abated somewhat and the dollar is now trading at NIS 4.967, up 0.5% from yesterday's representative exchange rate of NIS 4.9440. The dollar had earlier skyrocketed to just under NIS 5. "Everyone was buying ¿ local banks, foreign banks, business sector and speculators," one dealer said. "No one wanted to be caught without dollars. No one was selling."

The shekel has lost 13% since the beginning of the year and 17% since the 2% December cut in key lending rates. Dealing rooms estimate this morning¿s demand is coming from the public and business sector. However, mutual funds report they are not seeing public demand for foreign currency funds. Those entities believe the recent shekel devaluation stems from business entities and speculators.

Dealing rooms report that most early trade was intra-bank and the market was waiting to see how the business sector would respond. According to dealers, the business sector's end-of-month conversions could support the shekel, or at least slow devaluation in the coming days.

According to the dealers, the shekel's fall at the end of trading yesterday was the result of dollar acquisitions by one of the major banks. "The bank estimated that the shekel lost ground to NIS 4.9440 due to the options expiry, and that the rate would drop after that," one player explained. "When the shekel didn't gain ground, the bank was forced to correct its position and buy dollars, helping to boost the dollar to NIS 4.9550."

The economic entities estimate the general trade is continued shekel devaluation until the level of uncertainty in the country drops. "NIS 5 to the dollar is not so far away," one dealer said, noting the economic plan hasn't been ratified, the Bank of Israel amendment is on the agenda, the security situation has not improved, and international ratings agencies are planning to lower Israel's sovereign credit rating.