Fed Bond Cut Curbs Shekel

YERUSHALAYIM -

The decision of the U.S. Federal Reserve to cut the rate of bond purchases has already caused a weakening of the against the dollar, Globes said on Thursday.

The shekel-dollar exchange rate was NIS 3.478/$ on Thursday afternoon. On Wednesday, the Bank of Israel set the shekel-dollar representative exchange rate at NIS 3.462/$.

In international markets, the dollar has been strengthening against leading currencies, and is traded at $1.384/€ against the euro, and $1.655/£ against sterling, but it has weakened to ¥102.27/$ against the yen.

The Federal Reserve’s decision on Wednesday had been expected. It cut the rate of bond purchases by $10 billion per month to $55 billion starting April.

FXCM, Israel’s research department, thinks that the Fed’s comment about the interest rate is the first concrete sign of a future rate rise. “Janet Yellin who was supposed to be a ‘pure white dove’ and who even caused speculation before she took up her post that she would expand bond purchases, has surprised us.”

FXCM interprets the announcement as a vote of confidence on the U.S. economy which will have a long term positive effect on the dollar.

However, Utrade Investment House senior analyst Elad Salomon says that while the Fed’s decision to continue injecting capital into the U.S. equity market is a vote of confidence in the U.S. economy, it will weaken the dollar.