The dollar has risen by 12 agorot during the past three
months. "This is a small but sure increase," say
economists.
The foreign currency market was unusually sleepy last week
with the dollar and the euro showing very small fluctuations
except for Thursday, when the dollar posted an increase of
0.59 percent against the shekel. The dollar was traded
internationally with stability against the euro throughout
the week.
On Thursday the Bank of Israel canceled the diagonal trading
range that set a certain border for the exchange rate of the
shekel against the currency basket. The majority of figures
active in the foreign currency market predicted that the
cancellation of the trading range would have neither short-
term or long-term effects. The market reacted that day with a
relatively unusual increase of 0.59 percent (2.5 agorot) in
the dollar rate against the shekel.
In fact, officials of the Bank of Israel said that the Bank
has not intervened in the market for eight years to enforce
the range. The official range has also been gradually widened
for the past few years. Thus, the cancellation of the
official range is expected to have no effect on the market
whatsoever. The main effect is that Israel will now
officially have a freely traded currency whose rate is set by
the market instead of a managed currency. In fact, many
central banks in countries that officially have a free
currency intervene much more than the Bank of Israel has in
the recent past.
A speech by US Federal Reserve (the central bank of the US)
Chairman Alan Greenspan, who proclaimed "the US economy is
reasonably stable," failed to make an impression and the
dollar and its exchange rate was almost unchanged on Friday
at 4.432 shekels. Despite the low fluctuations the dollar
continue to strengthen slowly against the shekel, resting on
the uncertainty of the European market and the good
macroeconomic figures released in the US. The US dollar,
which was traded at 4.31 just three months ago, leaped to a
level of 4.35 a month ago and then to the current exchange
rate is 4.43.
