Over a 10 month period, the shekel depreciated by around 30% against the dollar. Since the peak of 13th March, the shekel has clawed back around 5% of its value. What’s up?

Fact 1: The Bank of Israel had an open policy of buying dollars over a year or so, a policy that ended with the onset of 2009.

Fact 2: Israel has always maintained a “competitive” rate of interest against the dollar. However, this policy has been blown apart by the recent fluctuations of the international banking system.

Fact 3: And when Obama and his team move, anything can happen. Today with the release of the policy on toxic assets, the shekel began to revalue, then devalued, and has finished its trip almost back where it started – about 4.04 shekels to the dollar. Are speculators cashing in?

I was intrigued by what Michael Eisenberg had to write.

For those of you who were optimistic on the dollar and budgeted anything above 3.7 Shekels to the Dollar, do yourself a favor and re-budget ASAP so you do not delude yourself into losses. And for those Israeli public companies who experienced some extra profitability last quarter due to the rise in the dollar, be aware that the profits may evaporate.

Where to next? Globes quotes Prico, an on-line foreign exchange broker. Internal USA policy will keep the dollar weak. Back in Israel,

In the short term, Prico advises keeping an eye on the shekel 4/$ level, which can be expected to provide a support level for the shekel-dollar exchange rate. The next support level below this psychological level, shekel 3.95/$, is very important, because support at this level could support an upward correction, possibly to as high as shekel 4.15/$.

Confused? It gets better. “The Economist” magazine has just described Israel as one of the “lands of opportunity”.