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The Bank of Israel is once again intervening in an effort to slow down the steep decline in value of the American dollar against the shekel which has hit Israeli exporters hard.

The central bank announced Thursday it will begin buying on average $100 million per day effective immediately, up from the $25 million sum which it announced it would purchase in March. The move comes as part of the bank's efforts to raise its foreign currency surplus to the $35-40 billion range.

News of the bank's dollar purchase sent the value of the greenback surging by four percent to NIS 3.305. Just minutes before the announcement, the dollar fell by 0.5 percent.

Bank officials said the decision to accelerate its purchase of dollars was reached after analysts concluded a careful appraisal of current market conditions. "The Bank of Israel will continue to examine this plan periodically, while taking into account the changing market landscape," the bank said in a statement.

Foreign currency traders predicted the bank's move would push the value of the dollar up significantly. "The dollar will go up now, and afterwards there will be a sell-off, and then there will be a long-term rise."

The Bank of Israel, led by Governor Stanley Fischer, has intervened in the forex market this year, suddenly stepping in to buy $600 million over a two-day period in mid-March as the fluctuations turned violent. The Bank of Israel also intervened by buying $25 million on each business day, roughly speaking, with the stated purpose of increasing Israel's foreign currency reserves by about $10 billion. The Finance Ministry also started to intervene, albeit more subtly: in the first week of June it bought forward contracts, swapping dollar debts maturing at the end of 2008 for shekels.

Dollar down on WednesdayThe shekel strengthened further against the dollar on Wednesday, slithering to a 12-year low point last seen in November 1996. Its official exchange rate fell by 1.1% to 3.23 shekels, after which the greenback continued to weaken in interbank trading to 3.225 shekels. One dealer surmised that foreign banks were soaking up shekels and selling dollars.

The euro weakened against the shekel too, falling by nearly 1% to 5.076 shekels.

Meanwhile, in the global scene, the dollar appreciated by about 0.3% against the euro, by to 1.5712 dollars.

A Bank Leumi trader said Wednesday that the dollar has been hovering at between 3.24 and 3.28 shekels to the dollar for days. "We are still within the lower end of this range - for the meanwhile," he noted.

Citi's local vice president Neil Corney suggested that the shekel is benefiting from a trend of weakening major currencies, and also, the markets seem to be turning up, making investors a little less risk-shy, and more attracted to emerging economies like Israel.

Corney ascribed Wednesday's weakening dollar among other things, to comments made by U.S. Federal Reserve chairman Ben Bernanke's speech on Tuesday, who said that the Fed is very committed to financial stability. Bernanke said he is weighing several possibilities, including extending the loans granted to investment banks beyond this year.

Corney added that although the trend of sellers (of dollars) outnumbering buyers has continued this month, he sees no common denominator among the sellers - be they foreign or local. The shekel, he says, is one of the strongest currencies in the world against the dollar. More to the point, he doesn't rule out the possibility of the dollar dropping below NIS 3.