The Bank of Israel is coming under mounting pressure from exporters, manufacturers and some within the financial system to intervene resolutely to stabilize the dollar/shekel exchange rate.
“The Bank of Israel’s policy regarding the dollar has been relatively successful until today, but must be considered anew and adapted to the new circumstances,” a senior financial source Globes after the psychological threshold of NIS 3.5/$ was crossed recently.
The BOI has veered from former Governor Stanley Fischer’s policy of selective intervention at volatile junctures. It is not buying dollars, and a decision a few days ago to allow interest rates to remain unchanged touched off another surge of the shekel.
Setting a fixed exchange rate is one of the bolder fixes being considered. According to the source, “This is a dangerous process, because it does not allow for its results to be blurred, and it puts the Bank of Israel’s reputation and credibility on the line.”
Such a drastic measure would require wall-to-wall support, he cautioned.