Shekel takes nose-dive on Marani capital gains tax hint

The shekel lost a little ground in currency trade during the day to a representative dollar rate of NIS 4.7870, down from Monday's representative rate, NIS 4.7840.

However, the dollar soared after the exchange rate was set, and is currently trading at NIS 4.81. Dealing rooms attributed the hike to Finance Ministry Director General Ohad Marani hinting in an interview with Israel Radio that the ministry may impose a capital gains tax as part of the emergency economic plan. The dealing rooms said lively activity is attracting all market players.

Before news of Marani's radio interview hit the floor, dealers estimated that in coming days the dollar would trade at NIS 4.75 to NIS 4.80, given the relative security calm.

Yesterday, Bank of Israel Governor David Klein unexpectedly raised key lending rates by 0.2% for May, however the shekel proved relatively impervious to the surprise throughout the day, prior to the treasury director's comments. "Klein yesterday clearly signaled that he won't allow the shekel to devaluate and affect price levels," one dealer said. He estimated that in the short range the dollar would cross upward through NIS 4.80.

Bank of Israel data shows that in the first three weeks of March foreign exchange volume dropped 16%, and standards deviation dropped to 8.5%. The dollar traded in a narrower price range. All this indicates the foreign currency market has settled into relative calm.