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The shekel has continued to weaken against both the dollar and euro in morning inter-bank trading today. The shekel-dollar exchange rate has risen 0.13%, compared with yesterday's representative rate, to NIS 3.665/$, and the shekel-euro exchange rate has risen 0.33% to NIS 4.724/€.
Yesterday, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.66/$, up 0.44% on Friday's rate, and set the shekel-euro representative exchange rate at NIS 4.708/€, up 0.46%.
In international markets, the dollar has weakened 0.15% against the euro to $1.2891/€, is unchanged against sterling at $1.5253/£, and has strengthened against the yen to ¥102.48/$.
The foreign currency market is still reverberating from the Bank of Israel's unexpected interest rate cut of 25 basis points last week to 1.5%, the lowest rate in three years. Market source believe that the Bank of Israel will announce another interest rate cut, to 1.25%, at the regularly scheduled date next Monday, in order to fight the strengthening of the shekel.
Prico Risk Management and Investments CEO Yossi Fraiman believes that the Bank of Israel will not announce an interest rate cut at the upcoming decision, "preferring to save its ammunition for when it will be needed to stem the strengthening of the shekel, or to stimulate economic activity."
FXCM Israel said today that the trend in the dollar on world markets was the main factor affecting the shekel-dollar rate. "Last week's breakout by the dollar on world markets may indicate an upward turnaround. The dollar is strengthening because of growing signs that the Federal Reserve is drawing up a plan to reduce its quantitative easing, and that it is getting the financial market used to the idea."
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