Shekel strengthens at opening

FXCM Israel: A volatile week can be expected on the foreign exchange market.

The shekel has strengthened at the opening of foreign exchange trading this week. The shekel-dollar rate is down 0.23%, compared with Friday’s representative rate, at NIS 3.6277/$ , and the shekel-euro rate is down 0.15%, at NIS 4.6934/.

FXCM Israel says in its market review this morning, “The shekel-dollar exchange rate has been rising for six weeks continually, and is now NIS 0.20 away from its lowest level in July-August. Apart from a few brief halts, we have not seen a real downward correction along the way, and this demonstrates the change in the balance of forces in the local foreign exchange market in the past six weeks. There is no doubt that many foreign players who saw the shekel as an economic asset of rare stability are starting to change their minds, and are expressing this by getting out of our currency. This is also manifest in the relative weakness of the shekel in comparison with the performance of other currencies against the US dollar.

“This week, the shekel-dollar pair will be affected by both local and global factors. In the local political arena, the budget discussions are entering the final straight, with the market waiting to see how the prime minister and the minister of finance will reconcile the desire to avoid expanding the fiscal deficit with the desire to avoid raising taxes. At present, the budget uncertainty is weighing on the shekel, as the market fears both expansion of the deficit on the one hand, and, on the other, the political instability that will result if Minister of Finance Yair Lapid’s Yesh Atid party quits the coalition because of disputes over the budget.

“On the global stage, the dollar index is at a 14-month high, because of expectations of an interest rate hike and a rise in bond yields, and because of the obvious weakness of the European currencies. This week, investors around the world will have their eyes on the Federal Reserve’s interest rate decision and the referendum on Scottish independence. The Federal Reserve is expected to continue tapering its quantitative easing program, but the markets will chiefly be interested in the policy statement and in whether it contains hints of a possible interest rate rise earlier than currently anticipated. The referendum in Scotland will make trading in the euro nervous. In Israel, the Consumer Price Index is due to be released today. All these things promise us another week of high volatility on the foreign exchange market both locally and globally, just before trading starts to thin out in Israel during the Jewish holiday season.”

Published by Globes [online], Israel business news – www.globes-online.com – on September 15, 2014

Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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