Bethel Finance: Shekel mixed following eurozone rating cuts

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Bethel Finance news:
The shekel weakened against the dollar, but strengthened against the euro, at the opening of inter-bank trading today. The shekel-dollar exchange rate is up 0.10%, compared with Friday's representative rate, at NIS 3.834/$, but the shekel-euro exchange rate is down 1.14% at NIS 4.866/€.

The decline in the euro-dollar rate represents the first reaction of the foreign exchange market investors to S&P cutting the ratings of nine Eurozone countries, among them France, Spain, and Italy.

Investors are also waiting tensely for France's fateful bond issue today, in which the French government will try to raise €8.7 billion in preparation for the €1.5 billion European Financial Stability Facility (EFSF) issue that will take place tomorrow.

In international markets, the dollar is continuing to strengthen against the euro. The dollar-euro exchange rate is trading at $1.26/€, and the dollar-yen exchange rate is ¥76.85/$.

UBS AG managing director of currency strategy Mansoor Mohi-uddin said that investors should be short on the euro, and we are concerned about the multiple rating downgradings in the Eurozone, which we believe are still not fully priced, despite the fall in the euro to a 16-month low.

The euro weakened against the dollar by more than 1% on Friday, following the S&P downgrading of the ratings of European countries, including that of France to AA+. Spain, with the fourth largest economy in the Eurozone, had its rating lowered to A from AA, and Italy, the third largest economy in the Eurozone, had its rating lowered from A+ to BBB+. Austria's rating also fell from AAA to AA+ and Portugal's rating fell to BB, or junk level.