All bets are off on the future in light of the unprecedented roller coaster behavior of financial markets.
The one-way dollar continued to drive other currencies lower Wednesday, and the shekel-dollar rate in late Wednesday trading was quoted at over 3.88, the highest it has been since December 26 last year. Earlier in the morning, shortly after the foreign exchange website Prico predicted that stabilization of the shekel-dollar rate around 3.75 could set the stage for a rise to 3.86 later this year, investors continued buying dollars and sent the rate through the roof.
Analysts have explained that the surge in the dollar is mainly due to expectations that the collapse in commodity prices will allow European countries to slash interest rates in order to ward off a recession. A lower interest rate usually weakens a local currency and encourages investors to look elsewhere for a higher rate.
The Bank of Israel already has cut the rate sharply this year, but all bets are off on the future in light of the unprecedented roller coaster behavior of financial markets in the past several months. If investors continue to flock to the dollar as a safe haven for money, the shekel-dollar rate could approach the 4.00 level.
The shekel was the world's strongest currency against the dollar in the 12 months preceding this summer, when a weak dollar bought as little as 3.22 shekels. At its low, experts were cautiously advising that the shekel-dollar rate may recover to 3.70 by the end of December. However, in the past three months, it has lost virtually all of the rise in its value.
The Bank of Israel has profited from the turnaround following its announcement last March that is buying millions of dollars in dollars to shore up the low rate, which damages exports.
The Euro-shekel rate now is around the
Prices on the Tel Aviv Stock Exchange fell in tandem with foreign markets. The Tel Aviv 25 index touched near last week's two-year low while the Tel Aviv 100 index plummeted to close to its three-year low, also reached last week. The Real Estate index sank to slightly above last week's all-time low of 244 points since the index was established in January, 2005 at around the 290 level.
Stocks in Tel Aviv are likely to sink even lower Thursday morning following the sharp sell-off in New York Wednesday.
Crude oil prices tumbled to nearly $66 a barrel, but much of the hoped for decline in the price at the gasoline pump November 1 will be offset by the rise in the shekel-dollar rate.