The shekel-dollar exchange rate jumped 1.39% to NIS 3.683/$ in inter-bank trading this morning. Market sources estimated that the Bank of Israel bought $600 million in foreign currency this morning and yesterday afternoon in order to halt the downtrend in the exchange rate, which fell over 1.5% in recent days, reaching NIS 3.64/$. The shekel-euro rate has risen 1.42% this morning to NIS 3.87/€.
"The Bank of Israel has realized that it must push the shekel-dollar rate above the psychological level of NIS 3.70/$ in order to thwart the speculators," a market source said. "The Bank of Israel made several rounds of foreign currency purchases yesterday, and continued to buy dollars today through a number of banks."
The source explained that although it is still the beginning of the calendar year, when traders customarily sell large amounts of foreign currency, the Bank of Israel had decided to go against the trend by intervening in trading in order prevent a further slide in the shekel-dollar exchange rate towards the dangerous level of NIS 3.50/$. The source predicted that that the Bank of Israel would spend up to $1 billion on buying foreign currency in order to stem the tide.
Prico Group CEO Yossi Fraiman stated, "The Bank of Israel has realized that casual and one-time interventions are not enough; it must intervene continuously and over a prolonged period… It is important to realize that many small businesses have been harmed by shekel appreciation, not just the major exporters. When the shekel strengthens, imports become cheaper. The victims are the small enterprises that bought raw materials at high prices."
The shekel, regarded by many as one of the world's strongest currencies, bucked the global trend by gaining ground against the dollar over the past week, following reports published in Israel of 4% economic growth in 2016. Most currencies around the world lost ground against the dollar, due to expectations that the US Federal Reserve Board will raise its interest rate in March, and after statements in President Donald Trump's State of the Union speech supporting tax cuts and easing regulation.
Published by Globes [online], Israel Business News - www.globes-online.com - on March 2, 2017
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