Analysts at the Swiss investment bank UBS predict that the dollar to rebound this year, strengthening by 12% against the shekel by the end of 2008 to NIS 3.90.
On Friday the dollar closed at an official exchange rate of NIS 3.474.
The bank's analysts predict that the euro will appreciate against the dollar in the coming months to $1.60. But from the middle of the year they believe that the euro will begin to decline to $1.40, because, predict the analysts, the European economy will grow more slowly and inflation will climb. Further east, the Japanese yen is likely to continue appreciating against the dollar, reaching 100 yen by the end of this year, UBS predicts.
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The dollar has plunged against the euro, the Swiss franc, the yen and other major currencies - including the humble shekel, to its lowest exchange rates in a decade.
Meanwhile, Psagot Ofek Investment House expects the U.S. Federal Reserve to lower interest rates by 0.75%-1.00% in March, and that the continued depreciation of the U.S. dollar around the globe will lead to similar interest rate cuts by the Bank of Israel.
In a move that surprised many, Israel's central bank recently lowered interest rates by 0.5% to 3.75%. In the days before the rate cut, the forecasts had been for no change or a reduction of just 0.25%, while a few weeks earlier, analysts had expected that if anything, local interest rates would be raised.
Psagot's analysts say the dollar should continue to decline, especially given the thunderous collapse of Bear Stearns in the United States. Time will tell, but the Bank of Israel may prove to only have been the first central bank to intervene in the dollar's favor.
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