Klein: High Dollar Rate Caused by Lower Foreign Investment

Trade on the Foreign Exchange market opened Wednesday with high demand for the dollar - a trend which has characterized the market in recent weeks. The dollar leaped 0.63 percent to NIS 4.295, its highest level since October 1998.

Bank of Israel Governor, Dr. David Klein, said that the trend in the foreign currency market stems from the practice of foreign investors who are investing less in the Israeli economy, and also using some of their assets.

During an appearance at the Knesset Finance Committee on Wednesday, Klein said, "The foreign investors are selling their holdings gradually, not in a panic. They are defending their shekel assets in order to prevent losses stemming from devaluation in the wake of future purchases of foreign currency. As a result, the devaluation is occurring."

The governor refused to say whether the developments in the foreign currency market would influence his decision at the end of the month regarding the interest rate for next month.

The Bank Otzar Ha'ayal deals room said that the main demand for the dollar come from the large banks, and that this indicates the raising of money by dollar trust funds and acquisitions by large organizations.

The bank said that the drop of the shekel was not caused by one security-related event, but rather by the ongoing situation during the past few days and the drops on Wall Street. It appears that the dollar is steadying around 4.295-4.30.