The shekel continued to weaken against the dollar Thursday as global markets absorb the fact that even the resignation of Italian Prime Minister Silvio Berlusconi will provide no quick fix for his country's economic woes. The shekel dollar exchange rate was up 0.7% in inter-bank trading to NIS 3.738/$. However, the euro zone's debt problems strengthened the shekel against the euro and the exchange rate was down 0.33% at NIS 5.044/€.
This continued Wednesday's trend in the foreign currency market when the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.712/$, up 1.03% on the previous day's rate, and set the shekel-euro representative exchange rate at NIS 5.06/€, down 0.16%.
The situation in Greece was also weighing heavily on markets with Greek Prime Minister George Papandreou's resignation yesterday paving the way for a national unity government. The new government's first priority will be to impose a new austerity plan and thus ensure receipt of the €130 billion bailout package.
The situation in Italy - the world's seventh largest economy - was far more complex. The country was deep in debt and bond returns have exceeded the 7% threshold. The fear that Italy is next in line to reach insolvency is spooking markets.