Shekel Stays Strong Despite Foreign Currency Purchases

If the shekel continues to outmuscle the dollar, it’s not because the Bank of Israel hasn’t been doing anything about it.

As a result of foreign currency purchases aimed at curbing the shekel, Israel’s foreign exchange reserves at the end of May were at a record $107.367 billion, up $2.225 billion from their level at the end of April, according to the Bank of Israel. The reserves now account for 32.9 percent of GDP.

But despite the Bank’s intervention, the exchange rate as of late Wednesday was NIS 3.533/$, the lowest in three years, with no sign of a weakening in the shekel relative to the dollar. Over the past year, the shekel strengthened by 15.5 percent against the basket of currencies and by 8 percent against the dollar.

Israeli exporters, who have been badly hurt by the strong shekel, are again raising alarms about the situation. Earlier this week, Manufacturers Association of Israel president Shraga Brosh called on Prime Minister Binyamin Netanyahu and Minister of Finance Moshe Kahlon to urgently convene the cabinet, with Bank of Israel Governor Karnit Flug attending, to devise a solution.

The increase in foreign currency was offset by private sector transfers of about $15 million, and government transfers abroad of about $117 million.