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Rumors of a Shekel Devaluation Sends Black Market Prices Upward

A rumored new devaluation of the shekel has triggered a demand for black market dollars.

They are selling for 1.9 shekels to the dollar, or 15 percent more than the official rate of 1.6 shekels. The official rate has been in effect since the shekel was devalued by 10 percent in January 1987.

Rumors have spread that the government again plans to reduce the value of the shekel, even though Finance Minister Moshe Nissim is known to be opposed.

Nissim believes a new devaluation now would not be good timing, since Israel now has a healthy dollar reserve of $4 billion.

Economists agree that it is folly to buy black dollars at the higher rate because the government is not expected to devaluate the shekel at more than 10 percent.

Therefore, anyone who purchases the black dollar now at a 15 percent higher rate will eventually lose out.

Nevertheless, expectations of devaluation have caused the private sector to send large amounts of its foreign currency holdings overseas.

According to figures released by the Bank of Israel, the country’s central bank, businesses have shipped $420 million in foreign currency abroad, compared to $600 million worth imported into Israel during the first six months of 1988.

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