Israel shekel gains as mkt awaits rate decision

JERUSALEM, Feb 21 (Reuters) - Israel's shekel <ILS=> gained marginally on the dollar on Thursday, staying in a narrow range ahead of an interest rate decision next week and as the U.S. currency dipped globally.

The shekel's official rate was set at 3.6140 per dollar, up 0.2 percent from Wednesday's rate of 3.6220. It gained to 3.60 in trading after the official rate was set.

The shekel had reached a rate of 3.5780 set on Feb. 4, its strongest level since April 1998. Since then, it has stayed in a range of 3.59 to 3.62.

Tel Aviv shares rose 1.4 percent while 10-year bond prices <ILSAHR2683=TA> dipped 0.2 percent.

The dollar weakened slightly on a view that U.S. interest rates would decline further at the Federal Reserve's meeting in March.

The shekel is one of the best performing currencies so far in 2008 with a gain of nearly 7 percent against the dollar. The shekel appreciated by 10 percent in 2007.

The shekel has been underpinned by a widening of the Israeli-U.S. rate differential, which is now 1.25 percentage points.

The Bank of Israel is expected to leave rates alone for now due to continued inflation pressures that are expected to moderate in the second half of 2008. A Reuters poll found 13 of 15 economists expect no rate move at the central bank's policy meeting on Monday. Two foresee a quarter-point rate reduction. See story [L21806403].

Bank of Israel Governor Stanley Fischer has said he will not lower rates while inflation pressures persist.