The dollar hit an almost six-year low on Friday against the shekel: NIS 4.155. Yesterday the greenback recovered slightly in options trading on the Tel Aviv Stock Exchange, since there is no foreign currency trading on Sundays. The shekel-dollar exchange rate reached NIS 4.161.

To weaken the shekel, the Bank of Israel has been cutting interest rates. But it hasn't worked as foreign investors continue to buy shekels to make investments in Israel.

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The business sector has been increasing its criticism of Central Bank Governor Stanley Fischer due to his decision last Monday not to decrease interest rates for April from their current level of 4 percent. Sources say that if the dollar does not strengthen significantly by the end of this month, Fischer may have no choice but to lower rates for May by 0.5 percent.

The U.S. currency has been creeping down for a year now. Just 12 months ago it was trading at NIS 4.70.

While it hasn't done particularly well in world markets in the last year, in Israel the shekel has proved extraordinarily strong despite the Bank of Israel's efforts to weaken the currency. The shekel's strength is responsible for the negative inflation in 2006 of minus 0.1 percent, while the government's price stability target range is 1 to 3 percent.

The Bank of Israel is interested in a stronger dollar, which is why it has continued to lower shekel interest rates to make it less attractive to foreign investors.

However, the central bank has not had much success in weakening the shekel as investors continue to trade dollars for shekels and invest them here.

The interest rate announcement for May will be moved forward a day to Sunday, April 22, due to Memorial Day on April 23.

In world markets the dollar weakened at the end of last week to 1.3354 per euro. According to new International Monetary Fund figures, the dollar's share of world currency reserves has hit an eight-year low due to increased holdings of euros by central banks around the world. The dollar's share dropped to 64.7 percent in the fourth quarter of 2006, its lowest level since the IMF started publishing quarterly figures in 1999.

In other Bank of Israel news, it said today that Israel's foreign currency reserves totaled $30.5 billion at the end of March, down $311 million from the end of February. The drop is mostly a result of increased transfers by the private sector overseas, which were partially offset by the central bank's revenues on investments of the reserves.