Aug. 26--The rapid depreciation of the shekel continues the day after the surprise 0.25% interest rate cut by the Bank of Israel. In afternoon interbank trading the shekel-dollar exchange rate was up 0.87% in comparison with yesterday's representative rate, at NIS 3.574/$, and the shekel-euro rate was up 0.88%, at NIS 4.718/euro. The shekel-dollar exchange rate is at its highest point in more than a year.
Yesterday, even before the unexpected cut to an all-time low interest rate, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.543/$, up 0.682% on Friday's rate, and set the shekel-euro representative exchange rate at NIS 4.677/euro, up 0.002%.
FXCM Israel research department, "There is no doubt that the Bank of Israel stole the show yesterday and Karnit Flug has positioned herself as the key figure dictating Israel's current economic policy and managing the economic crisis just as discussions on the budget are about to begin."
FXCM added, "In yesterday's dramatic decision, Flug in effect shuffled the deck in the economic dialogue and put direct pressure on the policy makers, the finance minister and the prime minister, to move into line with her policy recommendations that widening the deficit will be disastrous for the Israeli economy and instead taxes must be raised. It will now be interesting to see how the minister of finance will respond after committing himself not to raise taxes."
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