CPI Fluctuations

There is no reason to anticipate devaluation as a result of the deregulation. Foreign currency market trends are usually determined by the local population, and only heightened by foreign investors thereafter. It is the Israeli business sector's attitude toward the foreign currency market, therefore, which will determine the market's trend, and in the meantime, the business sector here is exhibiting a clearly stable trend.

However, the business sector is today aware of the risks involved in Yahoo currency conversion chart, and is consequently very active in acquiring protection of its positions. One of the recent most interesting developments is the tremendous increase in CPI fluctuations, resulting in enormous volatility also in bond market yields. Paradoxically, CPI fluctuations are much sharper than dollar fluctuations, giving rise to the need to acquire protection against the index.

In the absence of options on the index or stock exchange interest, the banks developed this type of option for over-the-counter trade, and during the past year, there has been tremendous interest in them: within fifteen months, volume of trade in them increased to NIS 4.2 billion, rising to NIS 4.75 billion since the beginning of 2007.

The target public for these options is anyone whose financing comes from shekel -linked loans, and wishes to protect himself against index increases, investors in the bonds market who wish to protect their portfolios, and those with a gap between dollar and shekel receipts (importers and exporters).

Mr Brown recently announced a sweeping package of measures designed to prepare businesses for monetary union in 2008 including allowing them to convert shares to euros and pay taxes in the new currency. The moves will be seen by Euro-sceptics as further evidence of how Britain will shadow the single currency to the point of de facto adoption, while remaining outside the first wave of member states.

The measures are the clearest indication yet of the Blair administration's belief in the merits of EMU and its determination to ensure British business is not disadvantaged, even though the pound will not enter until 2002 at the earliest. The DTI is to consult business on the possibility of amending the Companies Act to make it easier for British firms to issue shares in euros and convert existing shares to euros. Companies will also be able to file accounts in euros and set up bank accounts in the currency.

Director General of the CBI said that adoption of the euro by business would have a pervasive effect on public opinion. Provided it was a success then it would push opinion in favor of a single currency. The Government also plans to give selected banks a seal of approval enabling customers to select ones that permit accounts to be operated in euros without punitive charges. Other legislative steps are also being examined, to make the euro easier for firms to use. The measures formed part of the Government's prepare and then decide strategy on EMU.