TEL AVIV - This week, scores of Israelis started trading their shares on the Tel Aviv Stock Exchange for U.S. dollars to stick under the proverbial mattress as the dollar continues to gain strength against the shekel.
The dollar closed at 4.5 shekels Thursday, it's highest mark this year.
In contrast to the dollar, the Euro fell to 5.4 shekels this week, it's lowest level in more than six months.
At the same time, the Tel Aviv Stock Exchange registered sharp losses. Experts explained the drop as the realization of profits following recent record highs.
The drop could also have been caused by questions about the government's stability and the possibility of holding early elections, as well as growing uncertainty as the target date for disengagement plan draws near.
How to react?
So how should investors react to changes in the market? Does this week's drop signal an overall change in direction, following two years of growth? Will the dollar continue to make gains against the shekel?
Ynet financial experts provide some answers.
NOTE: these are educated opinions only. Ynet takes no responsibility for their accuracy.
Where is the dollar headed?
The dollar's rise over recent days is consistent with that currency's rise around the world, especially against the Euro. This is because of the crisis Europe is currently facing following Holland's and France's rejection of the European Constitution.
Further supporting the dollar's strength against the shekel is the narrow gap between American and Israeli interest rates – 3 percent in America, as opposed to 3.5 percent in Israel. That gap is expected to close even more at the end of the month, when Federal Reserve head Alan Greenspan is expected to hike interest rates to 3.25 percent.
Stock Exchange - small element of hysteria
"Realisation of profits," "defensive posturing" and "caution," are all part of the standard explanation offered by market anaystst to explain sharp drops.
According to this understanding, there is no need to worry abut the latest lows, which stem from profit realization, and in light of coming political developments and the disengagement program set to begin in August.
Still, even if the upward trend continues, they will almost certainly not match the gains of the past two years, which saw growth of more than 100 percent. Many companies simply have no more room to grow.