. . . And in Israel

At the offices of Palestinian money-changers in Salah-ed-Din Street, the main road of Arab East Jerusalem, some foreign residents have found an outlet to avoid the high charges of Israeli banks.

In a system based entirely on trust, foreigners living here hand over checks - from their bank accounts in Europe or the United States - and receive hard currency, including bundles of US dollars in cash. Savings can be about $60 for every $4,000 brought to the country.

The high bank charges encourage these kinds of transactions, but they are not a major way of doing business. And though many greenbacks flow into the country, use of US dollars has declined here as Israel's shekel has strengthened.

Because of its close ties to the US, Israel is sometimes referred to as the 51st state. But the shekel is the only official currency.

Property prices in Israel are always given in US dollars, but strictly speaking such quotes are in breach of the local currency laws.

So each week the English-language newspaper, the Jerusalem Post, publishes the following disclaimer in its classified advertising section: "NOTICE TO OUR READERS. All advertisements in this newspaper giving prices in dollars are inserted on the sole responsibility of the advertiser."

Consumers buy homes and pay for their rent in the local currency, through bank transfers, at the equivalent rate to the dollar.

The reason that dollars are quoted is a legacy from Israel's hyperinflation days in the early to mid-1980s, when the shekel lost significant value sometimes several times in a single day.

At that time, Israelis did well to hoard US dollars in cash - if they could avoid legal detection. The longer they kept them, the more valuable the dollars became. But with inflation in Israel under control recently, the shekel has arguably become a more stable currency than the dollar. Some economists say anyone here who switched to dollars in the last two years probably lost money.

If one takes into account the main Palestinian population areas - the territories occupied by Israel since the 1967 war - three currencies are in operation. In the occupied territories, the shekel is the dominant currency, but prices are also quoted in Jordanian dinars and US dollars.

Both in Israel proper, and the Palestinian territories, many outlets will accept US dollars in cash for small items such as supermarket buying, a restaurant or hotel bill, or purchasing a gift. But major items such as houses or cars are seldom cash deals in any currency.

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