The Bank of Israel snapped up $75 million to $100 million in ongoing trading this morning as the U.S. currency continued to weaken against the shekel, pushing the exchange rate up to its current level of NIS 3.59.
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It was the central bank's second intervention in the currency market since April 8.
A weaker shekel helps the country's exporters, who are paid in dollars but whose expenses are usually in shekels.
The exchange rate broke through the strategic level of NIS 3.60 on Monday. On Tuesday morning the U.S. dollar fell by an additional 0.2% against the shekel, trading at a low of NIS 3.58.
The central bank's intervention pushed the dollar exchange rate back up 0.1%, to NIS 3.59.
The euro was at NIS 4.70 in interbank trading, and trading steadily against the dollar at $1.31.
Ayalon Group chief strategist Yaniv Pagot said the Bank of Israel might, recognizing that intervening in currency trading may not be enough to support the dollar against the shekel, decide to lower interest rates.
Interest rates in Israel are high compared to the United States, which increases the value of the shekel, Pagot noted. Investors, seeking better interest-based returns than they can get on the U.S. currency, are buying shekels.
"Let's remember that exports make up 40% of GDP, and harm to this sector's competitiveness from a strong shekel will slow growth and hurt employment," Pagot noted.
But, he cautioned, the central bank could find itself in a bind: Cutting interest rates would not only push down the shekel's value but would also further inflame Israel's already red-hot real estate market, boosting prices even more.