As shekel continues to climb Fischer hints at more forex intervention

The Bank of Israel took the market by shock when it suddenly reversed policy and intervened in the foreign currency market late last week, buying dollars to shore up the greenback and weaken the shekel in local circles. Moreover, Governor Stanley Fischer obliquely makes it clear that the central bank may well dip its hands into the market again, if warranted.

The Bank of Israel clarifies that it would not give advanced warning of any future intervention in the foreign currency market. that statement denied Bloomberg a news report to the contrary. In its press release, the central bank said: "Bank of Israel will not give prior notice every time it intervenes in the foreign currency market. Furthermore, Bloomberg's announcement does not attribute such statement to the governor."

According to the press release, "neither the Bank of Israel (nor the Governor) has undertaken, either within or outside of the bank, any specific amount or any such intervention in the foreign currency market."

Meanwhile, the dollar slid another 0.09% against the shekel yesterday, closing at NIS 3.337 to the dollar. The day before the U.S. Federal reserve cut its key rate by another 0.75%, to 2.25%, leading to widespread speculation that the Bank of Israel will have to follow suit, to maintain the interest rate gap roughly where it is.

The U.S. currency has lost 12% of its value against the shekel since the beginning of the year.

In other news of the shekel, Finance Minister Roni Bar-On told the Knesset plenum yesterday that the government will "not hesitate to take action", if necessary, to cope with economic stress caused by the feebleness of the dollar and the strength of the shekel, which is rendering Israeli export relatively less competitive.

"The treasury management has its finger on the pulse of the economy and the crises surrounding us all the time," Bar-On told the Knesset. He promised that investment in education and infrastructure would continue, but confessed to being worried about the dollar's erosion against the shekel.