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The chartists' 15 minutes

It isn't economics holding up the shekel. Bemused players are consulting alternative analysts

You can't argue with the facts.

The shekel sprang another surprise, gradually climbing from Wednesday to touch a Friday high of NIS 4.26. That's almost 11 agorot from its peak rate of a few weeks ago.

All that bemused foreign and local forex players can do is try to understand why, as the bad news about Israel's economy relentlessly pours in, the shekel continues to gain strength.

The usual explanation behind the strengthening of the shekel at month-end is that exporters sell dollars to pay bills and salaries in shekels on the first of the next month.

But this time around, the banks' dealing rooms reported that it wasn't hi-tech exporters supplying the dollars, it was foreign banks. Mainly, it was Barclays ¿ usually a bit player in the local arena ¿ closing a major short position on the shekel it entered a few months ago.

The foreign banks are now out of the picture, having finished closing their positions during the last month. According to one of the busier dealing rooms in Tel Aviv, which works closely with its foreign counterparts, none of the big foreign banks have any positions in the domestic forex market any more, not for the shekel or against it.

The foreign banks probably want to end the year with zero exposure to the risks of the Israeli marketplace. In any case, these developments will make it harder for the shekel to grow stronger in the future, if the foreign banks stop supplying fresh greenbacks to the local market while taking profit.

Other factors moving the market
Leaving aside the precise identity of the dollar-sellers last week, many dealers feel that the month-end conversions no longer move the market.

Much of the dollar sales were by hi-tech companies needing shekels to pay salaries in Israel. But the times have changed. Workforces have been savaged and startups closed down in the hundreds. While there are month-end conversions, they no longer play a major role.

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Another element that still plays a part is interest rate spreads between the shekel and other key currencies. The central bank cut rates for November by 0.2%, lowering nominal interest on the shekel to 6.1%. But the Federal Reserve is expected to announce another rate cut tomorrow, either by 0.25% or maybe 0.5%, widening the gap again.

England and the EU are also apparently poised to cut rates in Alan Greenspan's wake. A Bloomberg poll of 24 economists found that 19 believe the European Central Bank will decide on Thursday to lower rates by 0.25%, with four opting for 0.5%.

In any case, the entire West is fast approaching the lowest lending rates seen for decades. So is Israel, but at a much slower pace.

When all else fails, consult the oracle
Yet the interest rate spread does not fully explain the shekel's strengthening last week. Dollar-shekel option trade on Sunday reinforced the trend, despite the shooting attack in Jerusalem.

For one thing, the interest rate gap isn't new. But dealers can't offer any explanations, saying only that nobody is in the mood to "fight the market".

Since no economic explanations offer themselves, currency players find themselves increasingly looking to the oracles of the financial markets ¿ technical analysts. More and more people are looking at trend lines and reading up on Fibonacci retractments before making moves.

Nobody really believes that historical figures will affect the shekel-dollar market's behavior in the future. But importers and exporters have to carry out currency deals. If they have to choose their timing randomly, why not be guided by the charts?

Lately, especially after the dollar sank below its support level of NIS 4.275, the charts have done pretty well at predicting the market trend.

You can't argue with success. Since the dollar's next support level is at NIS 4.245, we shouldn't be surprised if it drops to just there.