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Dollar nosedives to NIS 3.59 as BOI buys $650 million

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Dollar nosedives to NIS 3.59 as BOI buys $650 million

The dollar dropped 1% on Thursday, below the NIS 3.57 level, as various speculators and foreign institutional investors bought huge quantities of shekels. The central bank in Jerusalem bought some $650 million yesterday, and another $500 million Friday morning to stop the dollar's plunge. It was a massive intervention of the Bank of Israel, which can cause a spike in inflation, necessitating another interest rate hike, and further widening the gap between domestic interest rates and those in foreign countries. The real reason the dollar is dropping in Israel is because the dollar is weakening throughout the world, but the problem in Israel is that many companies make dollars, but they pay their workers' salaries in shekels. Growth across almost all industries is expected to slow down in 2011, as executives at some of Israel's high tech companies warned that their industry could completely collapse if the trend continues, leading to thousands of Israelis becoming unemployed and seeking work in other countries.

 

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