The Israeli Shekel extended decline against the U.S. dollar on Tuesday, following the Bank of Israel's surprise effort to cut rates to record low yesterday, in its attempt to prevent currency appreciation and low inflation.

Israel's central bank cut its base lending rate to 0.1 percent, from its already record low of 0.25 percent. The rate cut will be effective on Thursday.

"The monetary committee is of the opinion that, in view of the increased rate of appreciation and its possible effects on activity and inflation, reducing the interest rate to 0.1% is the most appropriate step at this time," the central bank said in a statement.

The Israeli Shekel slipped to 3.9182 per greenback, its lowest since February 16. On the downside, 3.95 is seen as the Israeli Shekel's next support level. The pair finished yesterday's trading at 3.9098.

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