Federal Reserve interest rate cuts drop the dollar once again - Haaretz

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Sat., February 02, 2008 Shvat 26, 5768

Israel Time: 01:30 (EST+7)

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Federal Reserve interest rate cuts drop the dollar once again

By Shlomi Sheffer

Tags: Federal Reserve, Economy

The decision of Ben Bernanke, the chairman of the U.S. Federal Reserve Board, on Wednesday to lower interest rates by another 0.5% after the surprise cut of 0.75% only a week earlier, has led the dollar to fall even further against the shekel and other major currencies.

The greenback fell 0.6% against the shekel yesterday and the representative exchange rate was set at NIS 3.625 - the lowest rate in a decade.

After the representative rate was fixed, the dollar continued to weaken in late trading.

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The dollar is now down 5.7% since the start of 2008, and off almost 10% percent since its slight recovery in the middle of December.

According to forecasts, the dollar will continue losing ground against the shekel as the Bank of Israel Governor Stanley Fischer, is not expected to lower Israeli interest rates in the near future due to forecasts of lower inflation. Dollar interest rates are now 3.5%, well below the Bank of Israel's 4.25% level; as well as that of most major currencies.

Those hurt the most from the dollar's weakness are companies which export to dollar bloc countries, and other firms whose income is fixed in dollars. Of course, there are those profiting from the fall of the American currency, such as importers who buy their goods in dollars.

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