Israeli Shekel Strengthens to Three-Year High as Truce Bets Grow

Israel’s shekel strengthened to a three-year high and bonds gained on speculation a cease-fire agreement will be forged after an initial attempt at peace was rejected today by Hamas.

The currency gained 0.3 percent to 3.4092 per dollar, the strongest level since August 2011, at 5:40 p.m. in Tel Aviv. The yield on Israeli government bonds maturing in March 2024 fell three basis points to 2.82 percent. The TA-25 equity index rose for a third day.

The shekel trimmed an advance of as much as 0.6 percent as Israel renewed air raids on the Gaza Strip after an Egypt-brokered truce it accepted failed to halt Palestinian rocket fire. Hamas, the militant movement that controls Gaza, said it wasn’t consulted on the plan, and its military wing rejected it.

“Even with the recent headlines about the cease-fire not holding, the market believes there will be a quick resolution to the fighting, and that is what is pushing up the shekel,” Tal Zohar Avda, the Tel Aviv-based chief executive officer of FXCM Israel, a currency trading house, said by phone today. Policy makers probably won’t intervene to weaken the currency if the gains stem from geopolitical reasons, Zohar Avda said.

The central bank has lowered interest rates 10 times since 2011 in an attempt to stem the currency’s appreciation. The shekel has rallied 4.9 percent against the dollar in the past year as offshore gas discoveries boosted prospects for economic growth and foreign investment.

The cease-fire, which Israel approved today after a week-long air offensive against Gaza rocket squads, was meant to end the fiercest fighting between the sides since November 2012. At least 192 Palestinians have died, including dozens of children and civilians, according to the Gaza Health Ministry. A tourist in Jerusalem died of a heart attack during an air raid.

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