It is doubtful whether the government even thought of the financial aspect when deciding to assassinate Salah Shehada, head of the military wing of Hamas. But now, almost a week after the attack that wiped out the Hamas leader together with 14 other Palestinians, and wounded more than 140 people it is clear that the mission reversed the trend in the forex market.

After a month of the shekel steadily regaining its strength, the foreign banks reverted to buying substantial amounts of foreign currency and dragged the Israeli banks in their wake. Together they boosted the dollar to NIS 4.75. While the foreign banks bet on another round of Israeli-Palestinians violence, dealers reported that another prod towards selling shekels had been a recent technical analysis of the shekel dollar market.

While stock and bond players tend to ignore technical analyses, currency players take charting seriously. And the analysis pointed clearly to a Buy recommendation for the dollar.

The return of foreigners to the local currency market, after an absence of two weeks, served to prove if anybody doubted it that they are the dominant player in setting the shekel's trend.

The Bank of Israel data shows it well. At the beginning of this month, the contribution of foreign players to the daily turnover dropped to around $100 million, sometimes less. This week it surged toward $200 million.

The foreigners buying dollars including an institutional investor not normally prominent on the Israeli currency scene swept the Israeli banks along. Daily volumes ascended to $800 million or $900 million a day, around $200 million more than in the previous days. On Thursday, for example, the volume of transactions in the "spot" market was $1.1 billion. The foreign banks were responsible for $311 million of that sum.

The trend U-turn on the forex market was expressed in more than the dollar's strengthening and trading volumes. It was evident in interest rates too.

A few days after the 2% rate hike in late June, when it became clear that the central bank's move had stabilized the financial establishment, swap transactions began to evince expectations of a rate cut in the months to come.

That also changed after the Israel Air Force's attack on Gaza. Now the swaps, which boast turnover double that of the spot market, reflect expectations that the shekel-dollar interest rate gap will not change that fast.

In other words, expectations of a cut in central bank lending rates have dimmed. Today, Monday, at 16:30, the Bank of Israel will be announcing its monetary policy for August. After the consumer price index shocked with a 1.3% rise in June, and with the foreign banks back in action, nobody thinks the central bank will dare to lower the rates.

The truth is, though, that the events are behind us. The Gaza mission has not aroused a new wave of terrorism, as of writing. Where will the dollar go now?

Market players firmly believe in the shekel. Dealers also believe, this time around, that the relative quiet on the security front together with the expiry of shekel-dollar options on the Tel Aviv Stock Exchange, on Tuesday, could beef up the shekel again this week. Dollar exchange rates of NIS 4.6 to NIS 4.7 wouldn't surprise a soul any more.

Yesterday the options market was meandering in that direction, with options trade showing a representative dollar rate of NIS 4.72, representing an 0.5% drop in the rate of the dollar compared with Friday's official rate.

On the other hand, the Bank of Israel data published Sunday makes it hard to see how the shekel can maintain its might in the medium run of a few months. After years of rising deposits by foreign investors, in recent months that trend has turned too. Foreign investors are repatriating their money. In June they sent home $400 million from dollar-denominated deposits, and another $39 million worth of shekel deposits.

The data on direct investment by foreigners is even more troubling: direct investment sank by 95% in the first half of this year against the same period of 2001.

When the greenback itself is sinking against the euro because Europeans and Japanese are taking their money out of the States, clearly, unless the outflow of dollars from Israel is stopped the shekel cannot retain its strength over time.