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The dollar continued its fall yesterday, not only against the shekel but vis-a-vis most major currencies. The greenback tumbled for the third straight day, leaving little standing in the way of an all-time low against a broad measure of currencies.

The dollar took a hit from all directions as investors fretted over ultra-low U.S. interest rates, the threat of a credit-rating downgrade, a budget battle and the competition of the euro as an alternative reserve currency.

Locally, the greenback fell 0.6% to a representative rate of NIS 3.405. After the Bank of Israel set yesterday's representative rate, the dollar continued to fall in after-hours trading to below NIS 3.4.

The dollar has now dropped 3.3% in the past month and 6% over the past three months against the shekel.

The shekel lost ground to the euro yesterday, with the European currency rising more than 0.8% to a representative rate of NIS 4.984.

In world forex markets, the euro climbed 0.8% against the dollar to its highest level in 16 months, $1.465. The euro has risen 7.8% against the U.S. currency in the last three months. Even the Japanese yen rose 0.5% against the dollar yesterday. The New Zealand dollar has gained 9.5% against the greenback in the past month, and the Australian dollar 7%.

Analysts: Fischer to leave rates alone

"The weakening of the dollar is a worldwide trend, so the Bank of Israel has no reason to intervene," said DS Securities and Investments chief economist Alex Zabezhinsky. "Compared to the strengthening of other currencies against the dollar, the shekel is in a good position in the middle. Investors have no reason to hold a currency that pays zero interest, and there is no intention of raising [U.S. interest rates], especially as inflation is rising and there is an abundance of alternatives."

The Bank of Israel will not intervene and buy large amounts of dollars until the shekel reaches NIS 3.3, said the CEO of the Prico group, Yossi Frieman. The central bank's dollar reserves are reaching their limits, and the Bank of Israel does not have an open check for unlimited intervention, he added.

"If you look at all these big-picture things, there's no reason to buy dollars right now," said Ronald Simpson, director of currency research at Action Economics in Tampa, Florida.

According to a London-based head of FX sales, "In the ugly-dog currency competition, the dollar is looking like the really ugly dog. The euro zone at least looks to be doing something about their debt problems."

Brent crude oil rose above $124 a barrel in response to the weaker dollar, and gold prices hit record highs of over $1,508 per ounce, climbing for the fifth session in a row, while silver rallied to its strongest since 1980.

Markets waiting for Bernanke

The U.S. dollar index, which tracks the greenback versus a basket of currencies, fell 0.4%, hitting its lowest level since August 2008.

Expectations that the Federal Reserve will keep U.S. interest rates at near zero for the foreseeable future, even as other major central banks have begun raising rates or are about to tighten, have pressured the dollar in recent weeks. Adding to the dollar's woes was a threat by Standard & Poor's on Monday to cut the United States' prized triple-A credit rating.

But Stanley Fischer, the governor of the Bank of Israel, will not increase Israeli interest rates in his announcement on Sunday, predict most analysts. Last month, Fischer raised April interest rates by 0.5% to 3%, surprising most local economists. While the move was directed at fighting inflation and keeping a lid on housing prices, it helped extend the dollar's steep drop, so Fischer will probably put off further rate hikes.

Investors have a treat in store in the coming week when Federal Reserve Chairman Ben Bernanke for the first time holds a press conference after the bank's rate-setting meeting on Wednesday.

It will be the highlight of a week - shortened by holidays in many places - that also includes the first major auctions of U.S. Treasuries since rating agency Standard & Poor's fired a warning shot at Washington over the budget deficit.

Bernanke's press conference on Wednesday - the first-ever regularly scheduled briefing by a Fed chief in the U.S. central bank's 97-year history - is an attempt by the Fed to communicate clearly what is on its mind.

The Bank of Japan, meanwhile, meets on Thursday with monetary policy and the damage from Japan's triple disasters still at issue.