Bank of Israel intervenes to dampen rise in the surging shekel
The central bank buys hundreds of millions of dollars but might have to get even more aggressive.
The Bank of Israel intervened Friday to buy what market players say was hundreds of millions of dollars in an effort to stem the rise of the shekel, which has strengthened to levels not seen since the summer of 2011.
The dollar’s representative rate was set later in the day at 3.434 shekels, an increase of almost 0.06%. The euro rose 0.11% on the day to 4.6785 shekels, while the British pound gained 0.06% to a representative rate of 5.8471 shekels.
Amid the dollar’s weakness, Israeli exporters have called on the central bank and government to tamp down on the shekel and take steps in general to boost exporters.
A strong shekel makes exports from Israel less competitive and cuts into exporters’ profit margins. On the other hand, it makes imported goods cheaper for Israeli consumers. The purchase of dollars or other foreign currencies is one way to lower the value of the shekel, by boosting demand for foreign currency.
“The Bank of Israel had given up the battle around 3.45 and let the dollar slip lower,” said Yossi Freiman, the chief executive of Prico Risk Management. “We’re close to a situation in which the Bank of Israel will have to intervene with greater aggressiveness,” he said, adding that the central bank might declare where it would like the exchange rate to be.
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