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Currencies |
| ISRAELI SHEKEL |
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| Introduction
| Overview | Structure
| History | Factors
affecting change in exchange rates | Daily
trend of Israeli shekel | Weekly
trend of Israeli shekel |
| Introduction |
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Shekel or sheqel is one of the oldest units of currencies of the
world. The word shekel is said to have derived from the word
"she" that is a name for barley in Akkadian language.
Originally it was used to refer to a specific quantity of barley
and later on it came to be known as a term for money also. Shekel
can have shekels, sheqels or sheqalim as its plural versions.
Currently, Israel has been using shekel as its currency unit since
the state was formed.
The currency that caters to the state of
Israel is known by the name Israeli new shekel and it is divisible
in 100 equal parts of the subunit "agora". Israeli new
shekel came into existence in 1985 when it replaced shekel @ 1000
old shekels = 1 new shekel. The currency is often abbreviated as
NIS and symbolized as "₪"
in the local language. The ISO 4217 regulation suggests the
currency code of the currency as ILS and numeric code as 376.
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Overview
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Israel is counted among one of the most highly developed economies
in the Middle East in all aspects whether industrial or financial.
The country produces almost negligible oil and has to import its
entire requirement for oil and derivatives. The prime concern for
the Israeli economy is the high rate of inflation it has been
battling for a long period of time and this was the reason that
the country had to switch over to new currency i.e. Israeli new
shekels in 1985. Since then, the same currency is being used for
exchange in the country. In 2003, all the currency controls from
above the Israeli new shekel were removed and it was made a freely
and fully convertible currency. Unlike in prior times, it adopted
a floating exchange rate system with predefined inflation limits.
The value of Israeli shekel is also dependent
on international factors especially US interest rates. The
relation between the US dollar and new shekel has a consistent
kind of effect as in if the value of shekel drops 1% against the
value of the US dollar; it increases the annual inflation by 0.3%
points. This relationship can be cited by a recent example when in
2005, the US interest rates were consistently higher, the Israeli
shekel reached a new 8 months low against dollar. There are no
restrictions upon the imports and exports of any currency in the
country, though amounts equal or above 80000 shekels shall be
declared.
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Structure
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The latest issue of Israeli currency was made in
1999 with 7 denominations in the coinage and 4
denominations in the paper currency. The Bank of
Israel performs the functions of a central bank
in Israel since 1954. The central bank is a big
unit of around 800 employees, one third of the
employee force being cut down recently due to
the restructuring policy as a consequence of
adoption of new and improved work methods. The
banknotes are printed in just 4 face values
namely 20, 50, 100 and 200 shekalim unlike the
previous scenario when the bank notes were
issued even for the smaller denominations like
1, 5 and 10 shekalims. All the bank notes are of
same size but have different color patterns so
that they can be differentiated easily like the
20 NIS note is green, the dominant color on the
50 NIS note is violet, the 100 NIS note is brown
in color and red is the color of the 200 NIS
note. The obverse sides of the banknotes show
images of important people related to the
history of Israel and the reverse sides have
symbolic images related to important events and
places. The list below explains the banknotes in
detail
- 20
NIS note - front side has the portrait of
Moshe Sharret and backside has the picture
of Jewish Brigade volunteers in World War II
- 50
NIS note - front side posses the picture of
Shmuel Yosef Agnon and reverse side show
Agnon’s writings with his pen and glasses
- 100
NIS note - portrait image of Yitzhak Ben-Zvi
on the obverse and backside shows a
synagogue in Peki’in
- 200
NIS note - picture of Zalman Shazar on the
front side and image of typical alley in the
town with the writing from Shazar’s essay
about Safed
The denominations of the
current shekel coinage vary from 5 agorot to 10
shekelims. The face values include 5, 10, 50
agarot, 1 shekel, 2, 5 and 10 shekelims with 2
shekelim coins being recently issued in August
2006. Initially, 1 agora coin was also in
circulation but the central bank withdrew it in
1991. a basic feature on Israeli coinage is that
the all the dates mentioned on the coins are
according to the Hebrew calendar and use Hebrew
numbers. The reverse sides of the coins have
their respective values marked on it with the
date of issue. The obverse sides of the coins
have the symbol of Israel’s state emblem along
with different symbolic images embossed on them,
which are mentioned below
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| History |
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The state of Israel got its independence in the year
1948 from the League of Nations, administration being
in the hands of United Kingdom. Initially the name of
the state was not decided nor was the name of the
currency. The state didn’t have a central bank and a
printing press and also according to a British
mandate, it didn’t even have the permission to print
currency notes within the state. An immediate solution
to the problem of issuing national currency was sorted
out by passing an ordinance that provided that
government and the Anglo-Palestine bank would be
issuing the currency notes printed by New York’s
American Banknote Company in "Palestine pound"
denomination. Fractional coinage was issued with it
due to the shortage of coins in the country in "mil"
series and "pruta" series. The first coin to
be issued in Israel was a 25-mil coin.
In 1951, the Anglo-Palestine bank
transferred all its assets and liabilities to Bank
Leumi Le-Israel B.M that issued a new series of
currency with a changed name as "Israeli
pound" in 1952. At that time, the other functions
of central bank except issuing of currency were taken
care of by the ministry of finance of the country. In
1954, the Bank of Israel law was passed that stated an
establishment of a new central bank and Bank of Israel
became effective from the same year. The subunit of
the currency that was "pruta" was replaced
by "agora" @ 1 pound = 100 agorot in
1959-60. In 1969, a law regarding the change of
currency was passed making way for "Israeli
shekel" as the national currency but it was not
implemented until in 1980 when it was declared as a
official currency of Israel. A new agora coin series
was issued and circulated on the occasion. In the year
1985, "new shekel" was made the national
currency of the state with a value of 1 new shekel
equal to 1000 old shekel. This step was taken so as to
provide ease in the money calculations and
transactions. New Israeli shekel still sustains the
position of the national currency of the state.
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| Factors
affecting the exchange rates between two countries
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The volatility in the foreign exchange rates
depends upon a numerous macro economic factors that
have different degrees of importance to different
economies of the world. Some special and exceptional
factors affecting the rates may also exist in the case
of different countries. Following are shown the common
factors on which the foreign exchange rate depends
- Flow of imports and exports between the
countries
- Flow of capital between the countries
- Relative
inflation rates
- Fluctuation limits on exchange rate
imposed by the governments of the countries
- Merchandise trade balance
- Rate of inflation in the country
- Flow of
funds between the countries for the payment of
stock and bond purchases
- Relative growth
- Short term
and long term interest rate differentials
- Cost of borrowings
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