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The shekel regained strength after an initial dip following news of the assassination of hard-line minister Rechavan Ze'evy. The dollar is now trading at NIS 4.2960, about 0.35% above its closing level on Tuesday ¿ NIS 4.28.

Initial news that Ze'evy was critically wounded sent the shekel down, with the dollar climbing to NIS 4.30. News of his demise, confirmed three hours after the incident, lifted the dollar to a daily high of NIS 4.3050. But the shekel gradually got back to its feet as the session wore on.

Dealers report hefty trading volumes, but stress that the political assassination did not generate a panic. The demand for dollars was evidently based on assessments that the murder would have both diplomatic and military repercussions, though.

In recent days the shekel had been slowly climbing, with the dollar slipping from NIS 4.37 to NIS 4.28 Tuesday evening.

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Citibank dealing room manager Tal Vardi says trade opened, after the shooting, with the dollar up 2 agorot. But most of the trade is interbank, he said. Investors reacted calmly to news that right-wing MK Rechavam Ze'evy had been shot.

It is too soon to evaluate how the murder will affect the market, Vardi added.

Other market sources said that much of the pressure was being created by speculators in short positions hastening to close them, assuming that the dollar's erosion would now stop. Circumstances have changed, as one dealer said.

Most dealers expect the shekel to retain strength in the short run, with the dollar trading between NIS 4.28 to NIS 4.35.