The shekel rebounded strongly Thursday after Moody's said it has no plans to change Israel's sovereign credit rating from A2. But a morning surge by the Israeli currency was moderated by Fitch's revelation that there is a chance "greater than 50%" that it will be cutting Israel's rating within a few weeks.

The shekel's recovery began Wednesday afternoon, after the dollar had surged beyond the resistance level of NIS 4.90, and continued Thursday, lowering the dollar to NIS 4.833, 1.3% below its representative rate of Wednesday, which had been set at NIS 4.89.

After the Thursday official rate was set at NIS 4.845, the shekel continued to gain ground against the dollar.

A source at Moody's told TheMarker yesterday that the ratings for Israel already incorporate the escalation in hostilities and shocks the markets are undergoing. In its summary of September this year, Moody's said its Rating Outlook was Stable, indicating that the agency feels comfortable with the rating over the medium-term of six to 18 months.

But Fitch rebutted that even if the Knesset passes the budget, there are security problems impacting on the economy, and Israel's debt to GDP ratio does not support an A-minus rating.

Be that as it may, the shekel also found support in the ebbing of tensions in Ramallah, and Nasdaq's steep gains on Wednesday.

From a narrow economy perspective, shekels are a better deal than dollars these days because of the high interest on the Israeli currency, a forex player told TheMarker this morning.

The surge in bidding for dollars earlier in the week at high exchange rates of NIS 4.89 resulted from a panicky reaction to the security situation, and fears of the looming war with Iraq, the source added. But anybody believing that Israel is not facing economic doom has every reason to keep faith with its currency.