Dollar Drops to Two-year Low Against Shekel

During trading, the dollar even dipped below this 25-month low.

The dollar fell 0.93% in trading Friday to close at NIS 3.50 against the shekel, its lowest point in more than two years.

During trading, the dollar even dipped below this 25-month low.

The Bank of Israel did not intervene in currency trading. This may be because it lacks a permanent head – the central bank is currently being led by Karnit Flug, deputy to departing Governor Stanley Fischer.

In the past, the central bank has sopped up dollars in order to boost the exchange rate and keep the shekel down. A strong shekel hurts Israeli exporters.

The Finance Ministry’s debt-management department also did not intervene in currency trading, apparently because all employees were off for the Sukkot holiday. That department - part of the accountant general’s office - had bought dollars during recent trading in order to hedge the government’s risk due to dollar-denominated debt.

Capital market sources said yesterday that if the central bank and the Finance Ministry do not intervene, the dollar is likely to dip even lower against the shekel.

The dollar lost strength relative to other currencies after U.S. Federal Reserve chairman Ben Bernanke surprised the market with his announcement Wednesday that he did not intend to cut back a stimulus program that includes a massive buyback of government bonds.

The euro gained ground in Friday trading, closing up 0.447% against the shekel to a representative rate of NIS 4.743. The British pound also gained against the shekel, by a small 0.059%, closing at NIS 5.62.

The forces boosting the shekel relative to foreign currencies include the natural gas now flowing from Israel’s offshore reserves and the country’s balance of payments.

Bloomberg