Oct. 17 (Bloomberg) -- Israel’s shekel strengthened to the highest in almost six weeks as emerging-market stocks gained for a ninth day after European leaders endorsed parts of a plan to contain the region’s debt crisis.
The shekel rose as much as 1 percent to 3.6187 per dollar, the highest since Sept. 6, and was at 3.6305 as of 3:26 p.m. in Tel Aviv. The TA-25 Index gained as much as 1.2 percent today, before closing 0.3 percent lower. The measure surged 4.3 percent yesterday, the most since April 2009.
“There is less worry in the world about a recession and the dissolving of the Euro partnership so people are turning away from the dollar,” Dror Sachs, chief trader at First International Bank of Israel Ltd. in Tel Aviv, said by phone.
The MSCI Emerging Markets Index rose as much as 1.9 percent as the Group of 20 finance ministers and central banks set an Oct. 23 summit of European leaders in Brussels as the deadline to settle differences and flesh out a strategy to avoid a Greek default, bolster banks and curb contagion. The MSCI Index pared the gains after Germany damped expectations for a fast resolution to the crisis.
The yield on the benchmark 5.5 Mimshal Shiklit bond due January 2022 rose to its highest level in three weeks, increasing three basis points, or 0.03 percent, to 4.71 percent, the highest since Sept. 25, at the 2:45 p.m close in Tel Aviv. The Tel-Bond 40 index of corporate bonds gained 0.2 percent to 260.18, the highest since Aug. 4.
“There is a mood change in the world and investors are turning to more risky assets such as equities and corporate bonds,” said Gil Chen, a bond trader at Israel Brokerage & Investments Ltd. in Tel Aviv.
The Bank of Israel said today that based on fiscal developments in the first eight months of this year its forecast for the 2011 budget deficit stands at close to 3 percent of gross domestic product, which is within the budget framework.
Two-year interest-rate swaps, an indicator of investor expectations for rates over the period, gained four basis points to 2.80 percent.
Bank of Israel Governor Stanley Fischer cut the benchmark interest rate by a quarter point to 3 percent on Sept. 26 as inflation slowed, growth eased and Europe, one of the country’s key export markets, grappled with its debt crisis. Annual inflation slowed to 2.9 percent from 3.4 percent in September, the Central Bureau of Statistics said Oct. 14, below the 3.2 percent median estimate of 18 economists in a Bloomberg survey.
The two-year breakeven rate, which reflects market expectations for inflation over the period, fell two basis points to 169, implying annual inflation of 1.69 percent. The yield on inflation-linked bonds due June 2013 was rose seven basis points to 1.2 percent.
--Editors: Claudia Maedler, Alex Nicholson
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