Shekel stayed stable against dollar at NIS 4.7840

The shekel stayed stable against the dollar most of the day with a NIS 4.7840 representative exchange rate, 0.04% up from Friday's representative rate.

However, after Bank of Israel Governor David Klein announced a 0.2% hike in interest rates for May, the shekel climbed to NIS 4.7750.

In the morning the dollar traded at NIS 4.77, but later rose to NIS 4.78. The announcement on interest rates weakened the dollar on increased foreign currency activity. Dealing rooms noted in the morning that trade has been calm lately, and that standards deviation dropped to 8.8%. The calm in the foreign currency market, and the shekel hike against the dollar are accompanied by gains posted on the Tel Aviv Stock Exchange, and by calm on the bond market.

Investment bank Excellence estimates the dollar could drop in the short term to NIS 4.73 given relative calm in the fighting in the region, and assuming the cabinet and the Knesset approve the new economic plan. Excellence noted the dollar has recently traded at NIS 4.68 to NIS 4.81, in response to developments, and that at NIS 4.81 there was large dollar supply.

Investment bank Nessuah Zannex interpreted the governor's interest rate hike as signaling the government that it should meet the planned budget cut, signaling the Knesset that it shouldn't dilute the plan to cut the budget deficit, and signaling the foreign currency market that the governor won't tolerate rolling devaluation onto inflation.