U.S. dollar surges to highest level against Israeli shekel since 2009
Euro also gains ground as eurozone leaders talk up the common currency.
The American dollar and the euro continue to rise in value against the once-mighty shekel. Over the past week the greenback gained 2.2% on the shekel. Friday's representative rate was NIS 4.08, its highest level since 2009. And the euro crossed the NIS 5 barrier Friday, when the representative rate was set at nearly NIS 5.02.
The European currency gained 2.3% in value against the shekel last week, even besting the dollar's rise. The British pound began the week at NIS 6.27 and closed it with a representative rate of NIS 6.40.
The dollar's performance last week was similar to its performance against other currencies around the world, as investors have sought a haven in the U.S. currency amid concerns over a global slowdown and an even worse European debt crisis.
The dollar's strength against the shekel was supported by economic indicators of slower growth in Israel, a bellwether of possible further devaluation of the shekel in the future. "It doesn't appear that the local economy constitutes an attractive alternative for foreign investors," Bank Leumi said in its weekly survey Friday.
Internationally, there are some indications that investors are embracing risk again. Traders saw fewer reasons to buy ultra-safe investments such as U.S. government bonds at week's end, after key European leaders pledged to protect the union of 17 countries that use the euro. The 10-year U.S. Treasury note yielded 1.54% on Friday, up from 1.44% late Thursday. Its price fell 90 cents per $100 traded.
German Chancellor Angela Merkel and French President Francois Hollande released a joint statement Friday saying they were "determined to do everything to protect the eurozone." That followed a similar pledge the day before from Mario Draghi, president of the European Central Bank. It was a show of unity by leaders of the eurozone's two biggest economies and helped lift investors' anxiety.
The yield on the benchmark 10-year U.S. Treasury bonds soared Friday as investors moved out of bonds and into stocks. Bond yields rise when demand for them weakens. The Dow Jones industrial average blew past 13,000, a key psychological marker that it hadn't hit since early May. The Nasdaq composite index rose 2.2% on Friday, closing at 2,958.09.
The U.S. Federal Reserve and the European Central Bank both meet this week amid investor expectations of action to stimulate economic growth and, in the case of the ECB, tackle the spreading eurozone debt crisis. Equity prices tend to rise sharply in the hours before a Fed statement, like the one expected on Wednesday as traders and investors jockey for position and a chance to make a profit.
Next week's calendar has a double whammy. The Fed's monetary policy statement will come one day before an ECB meeting.