Hedge Funds Sold Dollars and Fischer Bought $800 Million

The Bank of Israel yesterday bought about $800 million, leading to a 0.6% rise in the representative rate of the U.S. dollar, which was set yesterday at NIS 3.78. Around the world, the greenback continued to weaken.

The United Nations yesterday called for a reduced role for the U.S. currency in international trade, through the creation of a new currency that would protect the economies of emerging markets from speculators. A report by the United Nations Conference on Trade and Development (UNCTAD) recommended the creation of an international reserve bank that would issue a new currency and supervise exchange rates among its members. Barclays Capital suggests that the dollar was weakened in the international marketplace by the UNCTAD statement.

The president of the Manufacturers Association of Israel, Shraga Brosh, said yesterday in reaction to the dollar's weakness that "the decline in the dollar-shekel exchange rate is liable to be the 'Lehman Brothers' of the Israel economy," a reference to the widespread effect that the collapse of the American investment bank had on the U.S. economy last year.

"The dollar's decline," said Brosh, "will lead to additional damage to Israeli exporters and more lay-offs. The business sector views the government as responsible for dealing with the threat. Thousands of factories, and tens of thousands of workers could go the way of [air-conditioner maker] Tadiran-Carrier. The collapse of the dollar rate will be the last straw for Israeli industry in moving its factories to China, the United States and Romania. The government must act against speculators who are doing serious damage to the ability of exporters to work in conditions of certainty, and are endangering thousands of [Israeli] jobs."