Last update - 00:00 19/03/2008
Finance Min.: We won't hesitate to act against dropping dollar
By Haaretz Service and News Agencies
Finance Minister Roni Bar-On told the Knesset Wednesday that the government will not hesitate to act in the wake of the U.S. credit crisis and the plummeting dollar.
"The treasury is constantly following the crisis in the U.S. We shall act decisively and without hesitation if an intervention is needed," Bar-On said.
"It is hard to assess the effect of the dollar dropping because the trend is still not clear and we do not have a wide enough perspective," Bar-On said, adding that "I am disturbed by the possibility that the dollar will continue to drop against the shekel. Obviously, that drop would have a negative influence on the economy."
Tel Aviv stocks rose Wednesday morning as investors welcomed a hefty U.S. interest rate cut and a rally on Wall Street overnight. The TA-25 index rose by 1.8 percent and the TA-100 by 2.16 percent.
Sentiment was also lifted by better-than-expected earnings from major U.S. investment banks Goldman Sachs and Lehman Brothers, easing concerns about fallout from the global credit crisis.
As stocks began to climb, however, the dollar continued to plummet and is being traded at NIS 3.36.
While many investors were expecting the U.S. Federal Reserve to cut rates a full percentage point, they quickly overcame some initial disappointment, especially since a 0.75 point cut is still substantial. The Fed began lowering rates exactly six months ago, after the credit markets seized up due to soaring defaults in subprime mortgages.
The cut in the American interest rates, however, have only made the Shekel even more attractive and the dollar is expected to continue to drop throughout the day.
On Monday, Bank of Israel Governor Stanley Fisher will have to decide if he too will drop interest rates by 0.75 percent in order to strengthen the dollar and allay fears of a possible recession in Israel.
In Asia, stocks were also on the rise Wednesday as Japan's benchmark Nikkei 225 index climbed 2.5 percent and Hong Kong's Hang Seng index was up
2.4 percent.
On Tuesday, the Dow Jones industrial average soared 420 points - the biggest one-day point gain in more than five years.
Investors were also heartened by better-than-expected earnings from Goldman Sachs Group and Lehman Brothers Holdings, which came out just a day after markets worldwide were shocked by Monday's news that JP Morgan Chase had bought rival investment bank Bear Stearns for US$2 per share, or less than $250 million. That sparked concerns about the full extent of the credit crisis.