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Currencies
ISRAELI SHEKEL
Introduction | Overview | Structure | History | Factors affecting change in exchange rates | Daily trend of Israeli shekel | Weekly trend of Israeli shekel
Introduction


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.

Overview


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.

Structure

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 Agnonís writings with his pen and glasses
  • 100 NIS note - portrait image of Yitzhak Ben-Zvi on the obverse and backside shows a synagogue in Pekiíin
  • 200 NIS note - picture of Zalman Shazar on the front side and image of typical alley in the town with the writing from Shazarís 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 Israelís state emblem along with different symbolic images embossed on them, which are mentioned below

  • 5 agorot coin - a lulav between two etrogim depicting a replica of the coin that was in circulation during war between Jews and Rome

  • 10 agorot coin - a candelabrum having seven branches with a replica of a coin issued by Mattathias Antigonus
  • 50 agorot coin - a lyre
  • 1 shekel coin - Lily and "yehud" written in ancient Hebrew
  • 2-shekel coin - Two cornucopias
  • 5-shekel coin - Capital of column
  • 10-shekel coin - image of a palm tree having seven leafs and two baskets of dates kept besides it
History


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 didnít have a central bank and a printing press and also according to a British mandate, it didnít 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 Yorkís 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.

Factors affecting the exchange rates between two countries


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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