Last update - 00:00 05/02/2008
Dollar dives half-percent to NIS 3.578 sparking fears of labor strike
By Shlomi Sheffer, TheMarker
Might the Histadrut labor federation actually declare a strike because of the dollar's fall? We'll find out as the sell-off continues.
On Monday, the dollar weakened by 0.45% more against the shekel, closing at an official exchange rate of NIS 3.578.
Though the dollar has been feeble worldwide, it has lost more ground against the shekel than against most other currencies, partly because of the 1.25% interest rate gap in favor of the shekel (which makes risk-free investments in Israel, such as government bonds, more attractive than comparable U.S. assets).
Moreover, the U.S. Federal Reserve is widely expected to be preparing for another half-percent interest rate cut next month.
Fears of recession in the U.S. and the low interest rate are leading investors to seek their fortunes in emerging markets again. Israeli share prices have benefited: Tel Aviv blue chips gained a hefty 2.6% on Sunday.
But equity analysts at Bank Leumi predict that in the medium run, the dollar will rebound. Leumi adds that market prices already largely factor in another U.S. rate cut.