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Last update - 20:55 29/05/2008 Dollar plummets to 11-year low vs. shekel, trading at NIS 3.24 By Yuval Yoaz, Haaretz Correspondent Tags: Israel, shekel, dollar The dollar continued to plummet against the shekel on Thursday, dropping 1.5% to be traded at NIS 3.24. This is the lowest its worth has reached in 11 years - the last time it was traded at this rate was in January 1997. The euro also lost ground against the shekel, and the European currency's representative rate fell a steep 1.6% yesterday to NIS 5.07 per euro. The euro is at a 5-year low against the shekel, and is now at its lowest level since January 2003. However, in the rest of the world, the dollar actually strengthened yesterday, rising 0.46% against the euro to $1.5 per euro. The dollar recovered somewhat after the head of the Dallas Federal Reserve Bank hinted that the Fed is likely to raise U.S. interest rates. Advertisement In addition, the dollar has risen in anticipation of the publication of first quarter GDP growth figures. Forecasts are that U.S. economic growth was higher than expected for the first three months of 2008. In any case, the shekel has shown strength across the board, rising 18.9% against both the dollar and the British pound over the past year; 5.2% against the euro; and 5.7% against the yen. "The factors that supported the strengthening shekel have moderated greatly recently," claim the economists at the Harel Insurance and Finance Group. They forecast a 1.8% rise for the dollar in the next six months, which will return the greenback to the NIS 3.35 level. Harel analysts say the shekel's rapid rise against the dollar - and other currencies - is due to the quick pace of economic growth here in Israel, relative to other developed economies. In addition, the continued high level of foreign investments in Israel despite the world credit crisis, combined with a reduction in Israeli investments overseas, have also contributed to the shekel's rise. For now, the Harel economists say, these factors that boosted the shekel are moderating, and some have even changed direction. "Economic growth is expected to slow, and foreign investment in Israel will decrease, and Israelis' overseas investments will grow again. In addition, the daily intervention of the Bank of Israel to increase its foreign currency reserves will also help weaken the shekel," said Harel economists. However, they are still very cautious about predicting the shekel's fall, saying it will be very slow. "A deviation in inflation above the target will harm the credibility of the policies of the Bank of Israel, which in such a case will act to stop the decline by quickly raising interest rates, or by ending its intervention in the foreign currency market," said the Harel analysts. Regarding last week's rate increase  interest rates were hiked by 0.25%, from 3.25% to 3.5%  they said the central bank has prepared the ground for further increases if inflation, and expectations for inflation, do not fall. They expect interest rates to reach 4.5% in another six months, a full 1% higher than today. Harel forecasts May and June inflation of 0.6% and 0.4% respectively, and also a further rise in U.S. interest rates. Due to this, they recommend investing in CPI-linked Israeli government bonds. Related articles: Who stands to gain as dollar plunges against the shekel? Dollar at 11-year low vs. shekel Bookmark to del.icio.us   His Majesty's envoy Report: Bahraini king taps Jewish woman lawmaker as envoy to U.S. Light unto the nations After five months of suspense, the hoopoe is crowned Israel's state bird.   1.   Forget the dollar, EURO is coming soon to rule the world 17:32  |  Mark B. 29/05/08   2.   Did you hear the new name for the 2 NIS Coin? 17:55  |  Ira Piltz 29/05/08   3.   to #1 17:57  |  TruthMonger 29/05/08   4.   I agree with #3, truthmonger, Euro is temporary 18:27  |  David 29/05/08   5.   The Euro is down too. SHEKEL uber alles! 19:19  |  S 29/05/08   6.   To #3 : At least we won`t be controlled by AIPAC 21:03  |  European 29/05/08   7.   money moving out of america 21:04  |  IknowitALL 29/05/08   8.   # 4 david 22:42  |  Axel 29/05/08   9.   There Is A Way Out! 05:44  |  Yosemite 30/05/08

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