Dollar hits lowest point against shekel since July 2008

Options point to a further strengthening of the shekel against the dollar and the euro.

By ADI BEN-ISRAEL & YUVAL AZULAI
stack of dollars 248 88 (photo credit: Channel 10 [file])
stack of dollars 248 88
(photo credit: Channel 10 [file])
Options point to a further strengthening of the shekel, after the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.395 on Sunday morning – its lowest level since July 18, 2008. The dollar fell 0.13 percent to NIS 3.391 in early inter-bank options on Sunday and the euro fell 0.32 to NIS 5.021.
The shekel-dollar exchange rate has fallen over 8% since its high point of NIS 3.71 on January 31. The shekel has been strengthening thanks to the dollar’s weakness against other currencies, combined with interest rate hikes by the Bank of Israel, which have widened the interest rate gap against the dollar and caused capital inflows.
Last week, Federal Reserve Board Chairman Ben S. Bernanke kept the US interest rate unchanged. The Fed’s $600 billion qualitative easing 2 plan will expire in June, but Bernanke promised to keep the interest rate at its negligible level for an extended period. In short, monetary tightening is not in the cards in the foreseeable future, in contrast to other countries and the eurozone.
Meanwhile, the Manufacturers Association of Israel will hold an emergency meeting on Wednesday to discuss the strengthening shekel.
Scores of manufacturers and exports nationwide are due to attend, and Minister of Industry, Trade and Labor Shalom Simhon has been invited.
The meeting is entitled ‘Without exports, there is no growth and no jobs.” Company executives will call on the government and Minister of Finance Yuval Steinitz to institute measures to stop the appreciation of the shekel.
The Manufacturers Association says that the shekel has appreciated 17% against the dollar in the past two years, resulting in fewer shekels from every dollar earned overseas, and affecting the competitiveness of Israeli manufactures in the world. The Manufacturers Association warns that if the crisis continues, it will cause a severe blow to industry and have a direct impact on jobs.