Shekel Gains for First Time in 4 Days on Global Stimulus Bets

The shekel rose for the first time in four days and Israel’s stocks rose as investors speculated exporters will get a boost from U.S. monetary stimulus.

The shekel gained 0.2 percent to 3.7326 per dollar at 4:28 p.m. in Tel Aviv as the greenback weakened against 13 of 16 major currencies tracked by Bloomberg. The TA-25 Index rose for a second day to the highest level since Feb. 20. The Tel Aviv Bond 40 Index, which measures inflation-linked and fixed-rate corporate bonds, increased for a third day, adding 0.2 percent to 284.83.

European finance ministers opened the way for looser budget policies saying economic strains “may also justify in a certain number of cases reviewing deadlines for the correction of excessive deficits.” U.S. Federal Reserve Vice Chairman Janet Yellen said yesterday the U.S. central bank should continue its $85 billion in monthly bond buying. Exports make up 40 percent of Israel’s economic output, with the U.S. and Europe its largest markets.

“The shekel is today very much influenced by developments in dollar trading worldwide,” said Eytan Admoni, head of the international department at Bank of Jerusalem Ltd. “Looking ahead there are a number of factors which may weaken the currency, including a slowdown in the economy.”

Foreign Trade

Israeli economic growth eased to an annualized 2.5 percent in the fourth quarter, the slowest pace since the second quarter of 2009. Exports fell an annualized 6.5 percent amid the debt crisis in Europe, the destination for 34 percent of the country’s foreign trade. The shekel climbed 1.8 percent in the past three months, the third-best performer among an expanded list of 31 major currencies tracked by Bloomberg.

The yield on the 4.25 percent benchmark government bonds due March 2023 was unchanged at 3.91 percent. The Bank of Israel today issued 10 billion shekels ($2.68 billion) in one-year central bank Makam bills at an average yield of 1.7 percent, according to central bank data posted on Bloomberg. The sale was more than two times oversubscribed.

One-year interest-rate swaps, an indicator of investor expectations for borrowing costs over the period, rose less than one basis point to 1.59 percent.

The two-year break-even rate, the difference between yields on inflation-linked bonds and fixed-rate government notes of similar maturity, increased 11 basis points to 242 basis points, implying an average annual inflation rate of 2.42 percent over the period.

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