The shekel has weakened in inter-bank trading today. The shekel-dollar exchange rate is up 1.05% at NIS 3.622/$ and the shekel-euro exchange rate is up 0.44% at NIS 5.122/€. The shekel has weakened 6.5% against the dollar since the end of July.
In international markets, the dollar is strengthening against the euro for the fifth consecutive business day.
On Friday, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.584/$, up 0.28% on the day before, and set the shekel-euro representative exchange rate at NIS 5.099/€, down 0.13%.
USG analysts Eli Ben-David and Shay Zakhaim say that Israeli and foreign investors will continue to monitor the debt crises in Europe and in the US, and that trading will continue to be very volatile in international markets, because of negative sentiment and uncertainty about another quantitative easing plan in the US. The Federal Reserve will only make a decision at its meeting on September 20-21, on the basis of the slowdown in the global and US economies.
Ben-David and Zakhaim say that the Bank of Israel will not raise the interest rate through the end of the year, because of the negative U-turn in Israel and expectations of further declines in inflation and economic growth.
Prico CEO Yossi Frieman says, "What we saw yesterday and today on the TASE is just the warm-up for what is liable to happen in the foreign exchange market. This is only the start of a potential depreciation of the shekel against the dollar. If investors see that the budget framework is going to be breached and that Israel's debt-to-GDP ratio worsens because of the social protest, there is a real risk of a downgrade of Israel's sovereign debt. Later, the foreign currency supply that we've gotten used to will vanish as fast as they came. With fewer sellers of dollars, the shekel could return to NIS 4/$ or higher."
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