Rehovot Firm Financial Immunities Comments on Shekel Rise

The shekel rose to its highest in eight weeks against the dollar on speculation the Bank of Israel will keep interest rates on hold next week to curb inflation. The benchmark Shahar bond advanced for a fifth day.

The central bank aims to bring inflation back to the government target range of 1 percent to 3% annually.

Ptachia Bar Shavit, an economist at the Rehovot, Israel-based consulting firm Financial Immunities, said the central bank would only cut rates if the consumer price index in January fell 0.3% or more. The index declined 0.1%.

"Foreign investors weren't satisfied with the index, and in order to ensure another interest rate cut they sold dollars and bought shekels," said Dror Waserman, a trader at Clal Finance Batucha Investment Management Ltd. in Tel Aviv.

The shekel advanced to 4.1820 per dollar at 7:27 p.m. in Tel Aviv, compared with 4.2000 Sunday.

The yield on the 6.5% Shahar due in January 2016 dropped 3 basis points to 5.3% in Tel Aviv. The price of the note, which moves inversely to the yield, added 24 agorot, or NIS 0.24 per NIS 100 face amount, to 108.74.

The Shahar, meaning "dawn" in Hebrew, accounts for about half of all the government's domestic debt traded on the Tel Aviv Stock Exchange, according to Finance Ministry figures.

In a bid to push inflation back up into the target range, the Bank of Israel has cut its base rate 1.25 percentage points since October to 4.25%. The move has only weakened the shekel by 1% since the middle of December, not enough to spur inflation.

Source: Tal Barak. Shekel gains on speculation Fischer to hold rates steady. Bloomberg, JPost.com [FullText]